Reminder: April 30 Deadline Approaching for R&D Tax Incentive

Is your business at the forefront of innovation? Have you developed groundbreaking products or processes that could enhance your competitiveness in the market? If so, the Australian Government’s Research and Development (R&D) Tax Incentive could be a significant opportunity for your company. But time is of the essence – eligible businesses must register their R&D activities with AusIndustry by April 30, 2024.

What’s on Offer?

The R&D Tax Incentive offers generous tax offsets of up to 43.5% for eligible businesses. The size of the offset depends on the entity’s aggregated turnover:

Aggregated Turnover Under $20 Million: Entities in this category are entitled to a refundable offset calculated as the tax rate plus 18.5%, totaling 43.5% for most companies. This means profitable entities pay less tax, while those operating at a loss can receive a cash refund.

Aggregated Turnover Over $20 Million: Entities in this bracket are eligible for a non-refundable tax offset, which can be used to reduce tax liabilities or carried forward to future periods. The offset is determined based on ‘R&D intensity,’ ranging from 33.5% to 46.5%.

Changes to the R&D tax incentive program

Since July 1, 2021, significant changes have been made to the R&D tax incentive program, impacting income years beginning on or after this date. These changes include adjustments to refundable and non-refundable offset rates, an increase in the expenditure threshold, and modifications to provisions regarding feedstock, clawback, and adjustments.

Eligibility Criteria

To qualify for the R&D Tax Incentive, companies must undertake core R&D activities aimed at generating new or improved materials, products, or processes. Supporting activities directly related to core R&D activities also qualify.

Important Dates and Registration Requirements

Remember—if your company conducted R&D activities during the fiscal year ending June 30, 2023, and you believe they are eligible, you must register them with AusIndustry by April 30, 2024. This deadline is rigorously enforced. Companies with substituted accounting periods should remember the relevant lodgement date, typically 10 months after year-end.

Eligible Expenditure

The R&D Tax Incentive covers eligible expenditure incurred on registered R&D activities, including:

• Salary and wages of employees directly involved in R&D activities
• Contracted expenditure for R&D activities
• Decline in the value of assets used for R&D activities
• Other relevant expenses, such as overheads (rent, electricity) and materials consumed during experimentation.

Supporting Documentation

Accurate record-keeping is essential to substantiate the eligibility of activities and associated expenditures. Maintaining comprehensive records ensures compliance and maximises the benefits of the R&D tax incentive while minimising the risk of compliance issues and investigations.

How Morrows Can Help

At Morrows, our advisors can help you navigate the complexities of the R&D Tax Incentive. We can assist you in determining eligibility, identifying eligible expenditures, calculating entitlements, and ensuring compliance with AusIndustry and the Australian Taxation Office. As the deadline is fast approaching, proactive action is essential to maximising your potential tax benefits. Contact your Morrows advisor today to make the most of these incentives and secure the financial benefits your business deserves.