The R&D Tax Incentive program

Set-up your R&D in Australia

Under the new legislation, foreign companies and foreign owned Australian companies can now access the program and claim cash for amounts spent on R&D in both Australia and overseas.

The R&D Tax Incentive can provide eligible applicants with a cash refund of up to 43.5% of the amount spent annually on eligible R&D activities.

Background and project intellectual property (IP) can now also be owned by the foreign holding company 1.

The Government has budgeted over AUD$2 billion in benefits available annually, and to date is the most far reaching and accessible program to support and encourage companies to undertake R&D activities in Australia.

1 International transfer pricing rules may reduce the amount of the 43.5% benefit where project IP is not owned by the Australian subsidiary company.

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Benefits

The principle benefit under the program comes in the form of a tax offset which is either 43.5% refundable (payable in cash) or 38.5% non-refundable (carried forward against future tax liabilities). To qualify for the refundable tax offset the eligible entity must have annual grouped turnover of less than AUD $20 million and the company is not controlled by exempt entities.

Note: turnover of grouped entities outside of Australia is also counted in the AUD $20 million test.

The R&D expenditure subject to the tax offset is not deductible for tax purposes. The after tax benefit therefore depends on the grouped turnover and tax position of the eligible entity as shown below:

Grouped Turnover
Under AUD $20 MillionOver AUD $20 Million
Available R&D tax offset, calculated on eligible R&D expenditure18.5%
Plus the corporate tax rate#
8.5% for 0-2% of R&D intensity*
16.5% for >2% of R&D intensity*
Plus the corporate tax rate#

 

Liability limited by a scheme approved under Professional Standards Legislation. This is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this brochure. All information is subject to change without notice. We and each party providing material displayed disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of information or material in this brochure. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

* R&D intensity = R&D expenditure/total expenses

#The corporate tax rate is 25% from 1 July 2021 where a company’s aggregated turnover is below AUD $50 million and the entity is a base rate entity. Where the company’s aggregated turnover exceeds AUD $50 million or the company is a non-base rate entity the corporate tax rate is 30%.

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Eligibility

An eligible R&D entity includes:

  • An Australian company, or
  • A foreign company that is an Australian resident for tax purposes, or
  • A foreign company that is carrying on business in Australia through a permanent establishment and resides in a country that has a double tax agreement with Australia

Eligible R&D activities are defined as either core or supporting R&D activities.

Core activities are defined as experimental activities:

  • Whose outcome cannot be determined in advance based on current knowledge, and
  • Can only be determined by applying a systematic progression of work that is based on principles of established science, and
  • Are conducted for the purpose of generating new knowledge in the form of improved materials, products, devices, processes or services

Supporting activities need to be directly related to the conduct of core activities.

Eligible R&D activities need to be conducted in Australia. However, expenditure in relation to some overseas activities can be claimed where advance approval is obtained through an ‘overseas finding’ process.

The ‘own behalf’ rules imply that the R&D entity needs to own, control and bear the financial risk associated with the project IP. However, a change under the new program now allows the IP generated from the project to be owned by a foreign related entity.

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The R&D Tax Incentive program

How can we help

Prime can deliver the following services:

  • Undertaking an eligibility assessment on your current or planned R&D activities
  • Advice on structuring inter-company arrangements to maximise benefits under the R&D Tax Incentive program, whilst managing legal and tax issues on successfully commercialising the technology
  • Setting up the required Australian companies and providing all necessary compliance and ongoing accounting and taxation support
  • Advice on required documentation to be maintained in order to lodge a successful claim and support any audit activity that may arise
  • Preparation and lodgement of the annual claim

What our clients say

“Prime assisted us with our R&D claim under the new tax Incentive rules, provided advice on setting up and continue to assist with our ongoing accounting and compliance requirements. They understand our industry and were immediately able to make suggestions and point out issues specific to our circumstances. They made the whole process easy, efficient, and helped us get great results beyond our expectations.”

Gavin Choy
COO, Apollomics

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What our clients say

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Ben Hughes, EconomX

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“I have been using Prime for many years and one of the things I appreciate most is that their advice is only a phone call away and I always feel as a customer that Prime have my best interest at heart. It is a very personal service executed by very personable and helpful individuals. My advisor feels like family I am very satisfied.”

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