How to qualify for the R&D Tax Incentive?

This is Part 1 of the step-by-step guide for companies seeking information on how to claim the R&D Tax Incentive. You can read the full guide about How to Apply R&D Tax Incentive here. In this article, you will learn about:

• R&D activity qualification requirements.
• Missing qualification – case study
• R&D Tax Incentive application deadlines

Step one: R&D Tax Incentive Qualification

Step One involves a qualifying check-up to determine three key aspects of your business’ eligibility:

• Does your business have the correct entity structure? In short, only companies can claim R&DTI. This means that Trusts, Sole Traders, or Partnerships normally cannot.

• Does your business undertake activities that fall within the scope of what is considered R&D? R&D involves the generation of new knowledge through the design and development of a new or improved product, process or service which takes place in Australia.

• Does your business meet the minimum expenditure requirement? You must have spent at least at least $20,000 on Australian-based R&D to qualify.

R&D Tax Incentive claim process can be a self-assessment. However, the process of claiming the R&DTI is complex. It is recommended to hire an specialist who can ensure that you accurately define your R&D activities and claim all the relevant costs. Here is an example.

Case study – Missing Qualified Claims:

A client of ours used to claim R&DTI by themselves but due to the complexity of the process and lack of expertise in their team, they ended up engaging our services. When we assessed their cost inputs, we noticed some missing amounts over the last three years, the main one being their indirect costs. They had no understanding of what indirect costs were, nor did they include them as part of their R&D expenditure. Together, we revised their prior two years’ worth of tax returns to include these indirect costs.

The deadline for submitting an R&D Tax Incentive application is ten months after the End of Financial Year (EOFY).

Therefore, if your business’ Financial Year ends on the 31st of December, you have until the 31st of October to submit your application. If your business’s Financial Year ends on the 30th of June, you have until the 30th of April. It’s a strict deadline. Extensions are not granted. Missing the deadline means missing the opportunity to receive a 43.5% tax cash refund for every dollar spent on R&D activities for that particular financial year.

Once you determine that your business qualifies for the R&D Tax Incentive, you can proceed to STEP 2 AusIndustry R&D Application Form.

If you still have questions, we answer some of the most common enquires about R&D Tax Incentive here.

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If you would like to engage an R&D Tax Incentive specialist to determine whether or not your company qualifies for the R&DTI then please reach out to Alan Baghdasarayan, Government Grants & Incentives Director at BridgePoint Group who will provide a free 30-minute consultation.