• Research and development tax incentive: frequently asked questions

    Introduction

    The research and development (R&D) tax incentive provides a targeted tax offset to encourage certain companies (R&D entities) to conduct R&D activities that benefit Australia.

    The program is jointly administered by AusIndustry (on behalf of Innovation Australia) and us. It replaced the R&D tax concession for income years beginning on or after 1 July 2011.

    To help you to work out your eligibility for the R&D tax incentive and the amount that is taken into account in determining your R&D tax offset, we have provided answers to frequently asked questions about:

    • Substituted accounting periods
      • The R&D tax incentive applies to income years beginning on or after 1 July 2011.
      • If your 2012 tax return is for a substituted accounting period beginning before 1 July 2011, you are unable to claim the R&D tax incentive in your 2012 tax return; however, if you have conducted R&D activities and meet the eligibility requirements for the R&D tax concession, you can claim the R&D tax concession for that year.
      • The answers to these frequently asked questions help you in working out whether to claim the R&D tax incentive or R&D tax concession for your 2012 income year.
      • The answers also provide information about how you can claim the R&D tax concession on your 2012 tax return.
       
    • Payments to associates
      • R&D entities can only obtain the R&D tax incentive offset for expenditure they incur to an associate when they pay the amount.
      • If you incur an amount of expenditure to an associate and you pay the amount in the same year, you can take this amount into account when working out your R&D tax offset in that year (if you meet all other eligibility requirements for the R&D tax incentive).
      • These frequently asked questions help to clarify the application of these rules in the context of some common business practices.
       
    • Deductibility of R&D expenditure under other provisions
      • If an amount is eligible to be claimed under the R&D tax incentive, you must claim it under Division 355 of the Income Tax Assessment Act 1997 (ITAA 1997).
      • The answer to the frequently asked question explains this rule further.
       
    • Deferred franking debits
      • The R&D refundable tax offset generates a franking debit that is effectively deferred.
      • Generally, a franking debit arises in your entity's franking account when you receive a refund of income tax which includes a refunded amount from a tax offset.
      • To prevent the franking debit triggered by the receipt of the refundable R&D tax offset from reducing the offset's benefit, the franking debit is effectively deferred.
      • The answer to the frequently asked question explains this further.
       
      Last modified: 31 Aug 2012QC 25268