The ATO R&D tax incentive is a government program designed to encourage innovation and investment in research and development across industries. To qualify for this tax relief, businesses must meet specific criteria related to their entity type, the nature of their R&D activities, and eligible expenditures.
To be an eligible entity and claim the incentive, your business must be:
- An Australian-incorporated company;
- A foreign company that is an Australian tax resident; and
- A foreign company with a permanent establishment in Australia.
Sole traders, partnerships, and most trusts are typically not eligible.
Qualifying R&D Activities
The core of the R&D Tax Incentive lies in the activities undertaken. These must be:
- Experimental
- Generate new knowledge
- Uncertain outcome
Eligible Expenditure
To claim the offset, businesses must incur at least $20,000 in eligible R&D expenditure per income year (unless using a registered Research Service Provider). This can include:
- Salaries and wages for staff directly engaged in research and development (R&D)
- Contractor and consultant fees for R&D work
- Materials, supplies, and utilities that are directly consumed in experiments
- Decline in value of plant and equipment used for R&D
- Overhead expenses directly attributable to R&D
By thoroughly documenting all activities and expenditures related to research and development, you can claim the ATO R&D tax incentive with no hassle