Research and Development (R & D) Tax Incentive

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What is the R & D Tax Incentive?

The Research and Development (R&D) Tax Incentive is a refundable tax offset for Australian businesses engaging in eligible R&D activities.

The R&D Tax Incentive replaced the R&D tax concession from 1 July 2011.

Which entities are eligible?

Eligible businesses must have an aggregated turnover of less than $20 million per annum and not be controlled by an income tax exempt entity to be eligible for the 43.5% refundable tax offset.

Audits and reviews of Taxpayers

The ATO and the Department of Industry, Innovation and Science (on behalf of Innovation and Science Australia) jointly administer the R&D Tax Incentive.

The R&D activities must be registered with the Department of Industry, Innovation and Science before the tax offset is claimed.

The ATO does conduct reviews and audits to determine if the expenditure claimed by entities in their tax returns for their R&D activities is eligible for the tax offset.

The ATO may consider the following kinds of issues when reviewing a R & D claim:

  1. claiming ordinary business activities as research and development expenditure;
  2. claims previously made by other R & D companies;
  3. there is no scientific method to the activities;
  4. the scale of the activities was not reasonable to test the hypothesis;
  5. operators of R & D activities obtaining direct or indirect benefits from third parties which received moneys from the R & D company;
  6. apportionment of expenditure wrongly made to R & D activities
  7. the activities carried out to generate new knowledge has achieved the purpose and the expenditure is now ordinary expenditure; and
  8. fraudulent schemes.

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