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Research & Development Tax Incentive

R&D payments to associates

  • R&D expenditure to associates may only include amounts paid. Amounts accrued, or that are contingent cannot be included until paid. Associates of a company may include significant shareholders or their spouses, for example.
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  • Paying an amount to an associate can include making a constructive payment, where an entity applies or deals with the amount on their behalf or as they direct. The ATO usually only accepts constructive payments for R&D Tax where there is a valid and documented charge going back the other way, which can be netted off against the associate R&D entity charge.

Advanced and Overseas Findings

  • An advanced finding is a binding decision from AusIndustry about the eligibility of a company’s Australian and overseas activities under the R&D Tax Incentive. It operates similar to a private ruling request that the Australian Taxation Office may provide. It is a prerequisite for claiming R&D activities conducted overseas.
  • Generally, R&D activities conducted overseas can only be eligible for the R&D Tax Incentive where:
  • The activity to be conducted overseas has a ‘significant scientific link’ to core R&D activities conducted in Australia.
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  • The expenditure on overseas activities is less than expenditure on Australian core and supporting activities.
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  • The overseas activity cannot be conducted within Australia due to contravention of Australian laws or restricted access to population groups, natural features, or a lack of expertise or facilities in Australia to conduct that activity.
  • Companies intending to claim overseas costs in a particular year’s R&D claim must submit the activities relating to those costs through an advanced finding by the end of that financial year.

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