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| Research and Development Tax Concession |
| The Concession enables Australian companies to deduct up to 125% of eligible expenditure incurred on R&D activities from assessable income on their tax returns. An Incremental 175% Premium is also available in certain circumstances. |
| Definition of ‘Research and Development Activities’ |
| The formal definition of R&D activities are those activities conducted by a company that are: |
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- systematic, investigative and experimental activities which:
- involve innovation (ie contain an appreciable element of novelty); or
- high levels of technical risk (ie the technical outcome cannot be known or determined in advance on the basis of current knowledge or experience and the uncertainty can only be removed by applying scientific methods); and
- are carried on for the purpose of acquiring new knowledge (whether or not that knowledge will have a specific practical application) or creating new or improved materials, products, devices, processes or services; or
- other activities which are directly related to the undertaking of the above ‘systematic, investigative and experimental’ activities; and
- the subject of an approved R&D Plan
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In simple terms, R&D is working on a new product, process or service in a “trial and error” manner where there is a likelihood of failure.
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| The 125% concession is claimed by companies by completing the ATO R&D Tax Concession Schedule on their tax return in accordance with the guidelines and various income tax rulings. However, before claiming the concession, companies must satisfy themselves that: |
- they are registered by the IR&D Board for that year of income;
- R&D expenditure exceeds $20,000 unless the work is contracted to a Registered Research Agency; and
- the R&D is owned by the company claiming.
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| Tax Concession Deadline |
| Applications for the R&D tax concessions must be lodged within 10 months following the end of the claimant’s financial year. (ie for a company with a 30 June year end the claim must be lodged before 30 April. |
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