Salary expenditure for employees carrying out your R&D activities

You must substantiate the time spent on eligible R&D projects by your employees (that is, the researchers and technicians who carry out the R&D project). How you substantiate this depends on your specific circumstances.

Appropriate records for salary expenditure

The most accurate and effective method of allocating time is to maintain timesheets or job cards. If you don't use these methods, it may be more difficult to show that the allocation of time is accurate. It is your responsibility to make sure you keep sufficient records to support your claims.

However, we acknowledge that it may not always be practical for you to retain timesheets or job cards. If so, a summary sheet may be acceptable if the information is accurate and as reliable as a timesheet.

Situations where timesheets may not be practical include:

  • having a large number of employees making it difficult to retain individual timesheets
  • when an employee works exclusively on eligible R&D activities
  • when an employee works on long term projects which are mostly eligible R&D activities and the ratio of time between eligible and non-eligible activities is fairly constant - in this case, the employee could maintain a diary of activities.

If you use project hours as a basis of apportionment for other expenditure types, you may need to retain timesheets for this purpose, even if you do not need them to help support the salary component of your claim.

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If your employees do not work a standard number of hours each day, you may need to establish how much time they spent on non-R&D activities. You need to calculate an employee's hourly rate of pay to work out the cost of employing that person on R&D activities.

Where a portion of a staff member's time is allocated to R&D as a component of 'other' expenditure, it would be useful for that staff member to keep a detailed timesheet. If it is unreasonable to keep detail timesheets for these staff, you must still use a reasonable basis of apportionment for their time and be able to demonstrate how it relates to your R&D activities.

If salary amounts for R&D activities relate to your associate, you must calculate the amount on an arm's length basis and only amounts paid are eligible for a notional R&D deduction.


If you choose to use any method of apportionment to calculate your claim, you must be able to explain why this is the most reasonable basis. You may need to keep additional records to do so.

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    Last modified: 19 Jun 2012QC 26104