For a company to access the Federal Government’s Research & Development tax incentive program, a number of eligibility criteria must be satisfied. In addition to a claimant being an R&D entity by virtue of having a complying legal status, rather obviously the activity undertaken and expenditure incurred need to be of a required type in the eyes of both AusIndustry and the Australian Tax Office respectively.
A general principle is that R&D activities must be conducted in Australia, although AusIndustry has a discretion to extend the incentive program to offshore activity if specified conditions are met.
Legislation for this tax incentive considers two types of qualifying expenditure, being core (such as experimental, scientific and logical in approach, leading to new knowledge and technology) and supporting (where the dominant purpose directly relates to producing a good or service).
Although government agencies have issued guidelines aimed at clarifying whether expenditure is properly core or supporting, not surprisingly this aspect of the legislation is perhaps most contentious. Eundo advises Australian companies on how to review their R&D activity, how to systematically categorise expenditure and how to document their intended tax position. This advisory work is performed by an experienced tax professional who is a registered agent with the ATO. Eundo can also represent a client in any dealings with Federal agencies.
Finally, eligible expenditure in any R&D claim year must exceed $20,000, or a lesser amount if paid to a Research Service Provider or Co-operative Research Centre may also qualify. There is no upper limit on expenditure.
