Research & Development Tax Incentives For International Entities In Australia

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.

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.

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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.

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 Million	Over AUD $20 Million
Available R&D tax offset, calculated on eligible R&D expenditure	43.5%^#	38.5%^#

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.
^# Proposed tax legislation has been introduced to reduce the R&D tax offset rate to 41% or lower from the 2019-20 tax year onwards. The annual cash component received may also be reduced to a maximum of $4 million per annum. Clinical trial activities are excepted.

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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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R&D Tax Incentive Resources

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