The Federal Government acknowledges that the Australian economy relies on small business to support employment and local communities.
Recognising the importance of innovation to small business growth, the Federal Government has introduced a Research and Development (R&D) Tax Incentive to help SMEs invest in research and development.
The R&D Tax Incentive aims to incentivise Australian companies to conduct research and development activities onshore. However, under certain circumstances, R&D activities conducted overseas may also qualify.
To be eligible for this benefit, companies must submit an Advance Overseas Finding Application prior to the end of the financial year for which it wants to make a claim.
There are four conditions that must be met for a finding to be made that R&D activities conducted overseas are eligible.
Condition 1: The overseas activity must be covered by an Advance Overseas Finding.
Condition 2: The overseas activity must have a significant scientific link to an Australian R&D activity.
Condition 3: The overseas activity cannot be conducted in Australia because:
- The company requires access to a facility, expertise or equipment not available in Australia;
- Conducting it in Australia would contravene quarantine laws;
- Conducting it requires access to a population not available in Australia; or
- Conducting it requires access to a geographical or geological feature not available in Australia.
Condition 4: The total amount (actually and reasonably anticipated) to be spent in all income years on the overseas activities must be less than the Australian activities.
Unlike the annual R&D Tax Incentive claim process, the application for an Advance Overseas Finding is once-off. If granted, the finding remains provided that there are no material changes to the overseas activities.
Once granted, the overseas costs can be included as part of the annual R&D Tax Incentive claim. Both overseas and Australian costs are entitled to the same offset rate.
The R&D Tax Incentive is an annual process, and the minimum R&D expenditure required in order to claim in each financial year is $20k. Companies need to apply following their financial year-end, i.e. companies with a 30 June financial year-end can lodge a claim on 1 July.
However, navigating the process to access the R&D Tax Incentive can be complex and cumbersome. Contact the BridgePoint Innovation Advisory team on 1300 656 141 if you have any questions or need assistance to lodge an R&D Tax Incentive claim.