Research and development tax incentive: frequently asked questions
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.