R&D Tax Incentive - Application: Registration of R&D Activities now available - 27 June 2012

AppId is over the quota
AppId is over the quota
On Sunday 17 February 2013, the Government released its Industry and Innovation Statement, "A Plan for Australian Jobs", which contained some changes to the R&D Tax Incentive program.

Effective from 1 July 2013, very large businesses with annual aggregate Australian turnover of $20 billion or more will no longer be able to access the non-refundable 40 per cent R&D tax offset for each dollar of R&D expenditure. Instead, these businesses will be able to claim their R&D expenditure under general tax law provisions.

The changes are expected to affect the top 20 companies out of the 10,000 businesses that are undertaking eligible R&D activities each year. The Government reaffirmed its supporting commitment to small and medium sized businesses undertaking R&D.

Exposure Draft legislation outlining this change is expected to be issued in the coming months which is anticipated to include a definition of "annual aggregate Australian turnover". We will keep you informed regularly as further details become available.

AusIndustry has released the Application: Registration of R&D Activities under the R&D Tax Incentive. The R&D Tax Incentive applies to research and development activities and expenditure in full income years commencing on or after 1 July 2011. Companies will be able to register and claim the new R&D Tax Incentive benefit from 1 July 2012.

While the new Application is more streamlined than the previous form in some respects, we note that there is now a requirement to provide a reasonable estimate of the expenditure on Core versus Supporting R&D activities for each project registered. This requirement may lead to some additional administrative effort when preparing the form, with respect to the identification and classification of costs, or the apportionment of costs between multiple activities.

Similar to the old R&D Tax Concession program, companies will be required to lodge an Application form with Innovation Australia, through AusIndustry, within ten months of the end of their income year.

Upon registration, an R&D entity will be entitled to claim the R&D Tax Incentive in its income tax return. If you wish to make a claim on your income tax return, you must complete and lodge the Australian Taxation Office's Research and development incentive schedule 2012.

If you would like to discuss the new R&D Tax Incentive, the Application requirements or the new forms, please contact your PwC R&D adviser.

The New R&D Tax Incentive provides for greater opportunity to claim R&D undertaken overseas than the previous R&D Tax Concession program, but companies must be acting now for R&D conducted overseas in the June 2012 year.

In order to be able to claim R&D undertaken overseas, you must satisfy four criteria, which are broadly: The overseas activities must be covered by an Overseas Finding.The overseas activity must have a “significant scientific link” to one or more core R&D activities conducted in Australia (and the Australian core activities must be registered, or reasonably likely to be conducted and registered in future).The overseas activity must not be able to be conducted within Australia – this could be for a number of reasons, including access to a facility, expertise or equipment not available in AustraliaThe amount to be spent on the overseas R&D activities is not more than the spend on the Australian aspects of the project.The application must be made in the year of income the overseas activities are undertaken (the application can also cover up to two future years). This means if you undertook R&D overseas in the June 2012 year, you must lodge an application by the end of this month.

Similar to the old R&D Tax Concession program, under the new program, companies can continue to claim some minor amounts of overseas spend without an Overseas Finding.

If you think you may need to apply for an Overseas Finding, please contact your PwC R&D adviser as soon as possible.