Can my company claim an R&D tax offset?

The R&D tax incentive aims to boost competitiveness and improve productivity across the Australian economy by:

• encouraging industry to conduct R&D that may not otherwise have been conducted
• improving the incentive for smaller firms to undertake R&D
• providing business with more predictable, less complex support

The ATO and the Department of Industry, Innovation and Science (on behalf of Innovation and Science Australia) jointly administer the R&D tax incentive. Your R&D activities must be registered with the Department of Industry, Innovation and Science before the tax offset is claimed, and the ATO determines if the expenditure claimed in your tax return for your R&D activities is eligible for the tax offset.

Companies are able to claim when lodging their annual company income tax return. Smaller companies may claim the R&D tax incentive as a refundable tax offset.

‘At-risk’ rule

If you've registered for the offset, the 'at-risk' rule helps to determine if your R&D expenditure is eligible for the offset under the scheme. It looks at whether expenditure you intend to claim a tax offset for, can be considered 'at risk'.

The ATO has recently clarified the rule and how it applies to expenses claimed as an R&D tax offset, and claims for R&D tax offsets may be denied or reduced where the expenditure doesn’t satisfy the at-risk rule. This could be where expenses are fully or partly reimbursed. The ATO provides this example: They state that you can't include wage expenses spent on R&D activities in working out the amount of your eligible R&D expenses if you've received JobKeeper payments to help you pay those wages.

How we can help

TaxAssist Accountants is here to help and to ensure your expenses are carefully reviewed in your R&D tax offset claim to ensure you only include eligible expenses. Call us now for a free, no obligation consultation.

Date published 15 Jan 2022 | Last updated 9 Jul 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.