The research and development (R&D) tax incentive came into effect on 1st July 2011 and encourages companies to engage in R&D by providing a tax offset for eligible R&D activities.
The program is administered jointly by AusIndustry (on behalf of Innovation Australia) and the ATO. The ATO determines if the expenditure claimed in the tax return for the R&D activities is eligible, and AusIndustry manages the registration of the R&D activities and checks they comply with the law.
For eligible entities with a turnover of less than $20 million pa the R&D tax incentive is a 45% refundable tax offset (equivalent to a 150% tax deduction).
The requirements to be eligible for the R & D tax incentive include:
- Must register the R&D activities each year with AusIndustry prior to making a claim for the R&D tax incentive in the company tax return.
- Must be an R&D entity, i.e. company.
- Must be engaged in eligible R&D activities.
- Have notional R&D deductions of at least $20,000 for the year.
Eligible R&D activities are generally only R&D activities conducted in Australia. To be eligible for the R&D tax incentive the activities must be classified as either core R&D activities or supporting R&D activities.