Research & Development

Tax off-set for eligible research and development activities

Research and development (R&D) is a valuable tool for growing and improving your business. R&D involves researching your market and your customer needs and developing new and improved products and services to fit these needs. Businesses that have a R&D strategy have a greater chance of success than businesses that don’t. An R&D strategy can lead to innovation and increased productivity and can boost your business’s competitive advantage. R&D can lead to innovations in your business. These may be in terms of new products and services, improved processes and new ways to interact with your customers. These innovations can result in greater profits and lower costs. Innovation is also a useful way to grow your business.

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). 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.