The Federal Government’s Research & Development tax incentive program, introduced by income tax law effective from 1 July 2011, is open to all sorts of businesses with activities in Australia. Predictably, a number of eligibility criteria need to be met, and it makes sense for a Taxpayer to satisfy these aspects of compliance early in the R&D process.
To begin, it’s worth noting that potential claimants must submit to the jurisdiction of two separate Federal Government departments. In the first instance registration of an entity undertaking R&D activity must occur annually with AusIndustry (on behalf of Innovation Australia). Subsequently, because any R&D claim is made in an entity’s income tax return, then the Australian Tax Office is also involved. Although this two-prong process threatens to be unwieldy, experience suggests otherwise and claimants should merely be aware, not concerned.
In this commentary we consider but one of the eligibility criteria, specifically the legal status of a claimant. Generally speaking only corporate structures will be considered eligible for the R&D incentive. Such a company might be wholly Australian based, or foreign but with tax residence in Australia, or foreign but carrying on business in Australia through a permanent establishment defined in a double tax agreement. Consequently individuals, partnerships, exempt bodies and most trusts do not qualify.
Since businesses normally anticipate R&D expenditure, and subsequently make a claim under the incentive program, Eundo can review any legal structure early on so that this fundamental requirement is assured. All advisory work is performed by an experienced tax professional who is a registered agent with the ATO.
