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  • Part C – Clawback – R&D recoupment tax

    If you are eligible for the R&D tax incentive and you receive a government recoupment (such as a government grant or reimbursement) that relates to expenditure that is eligible for the R&D tax incentive, clawback applies.

    Clawback does not decrease the grant or offset you receive; rather it increases the income tax you are liable to pay. This income tax increase is called a 'clawback adjustment' or 'R&D recoupment tax'.

    A clawback adjustment arises where during an income year you either receive or are entitled to receive a recoupment from an Australian Government agency, or a state or territory body, and the following applies:

    • the recoupment (such as a reimbursement) relates to expenditure incurred on certain activities or the recoupment (such as a grant) requires expenditure to either be or have been incurred on certain activities
    • you are eligible for the R&D tax incentive for that expenditure (or decline in value notional deductions where the expenditure was for a depreciating asset used in those activities).

    Only complete this item if you have received a government recoupment during 2018–19 that relates to an amount you have notionally deducted at Part A Calculation of notional R&D deduction on the Research and development tax incentive schedule in the current income year or in earlier income years commencing on or after 1 July 2011.

    When you are subject to additional income tax as a result of clawback, you may choose to reduce the amount of expenditure in item 2 R&D expenditure related to recoupments to calculate the additional income tax for the clawback adjustment in a particular income year if:

    • the total R&D notional deductions in the income year in which the relevant R&D expenditure arose exceeds $100 million, and
    • the sum of the proposed reduction and any prior reductions under these rules for that income year is not greater than the amount by which your R&D expenditure exceeded $100 million (for example, if total R&D expenditure is $150 million, then you may reduce additional liabilities by no more than $50 million).

    If you are unable to claim the R&D tax incentive for expenditure related to the recoupment because section 355-405 of the ITAA 1997 applies (the expenditure is not at risk), you do not need to make a clawback adjustment. If section 355-405 does not apply to expenditure related to the recoupment, you may still need to make a clawback adjustment.

    See also:

    Item 1 Recoupments – (entitled to/received)

    Enter at item 1 Recoupments – (entitled to/received) the total amount of recoupment you have received or become entitled to receive, (other than under the CRC program) in the current income year, that relate to notional R&D deductions for which you have claimed an R&D tax offset in the current income year or in earlier income years commencing on or after 1 July 2011.

    Item 2 R&D expenditure related to recoupments

    Enter at item 2 R&D expenditure related to recoupments the total amount claimed as a notional deduction under the R&D tax incentive that relates to the recoupment shown at item 1 Recoupments – (entitled to/received). This may include amounts claimed as a notional deduction in the current income year or in earlier income years commencing on or after 1 July 2011. Do not include R&D expenditure that you have already taken into account to work out another clawback adjustment (extra income tax) for another recoupment.

    Where you have total notional R&D deductions that exceed $100 million, the amount used for the purposes of item 2 may be reduced. The amount of the reduction when combined with reductions under the feedstock and balancing adjustment rules cannot exceed the excess of notional R&D deductions over $100 million.

    Item 3 Project expenditure for which recoupments paid

    Enter at item 3 Project expenditure for which recoupments paid the total project expenditure for all years of the project for which the recoupment has been paid (including R&D and other amounts). You will need to consider the terms of the grant agreement to work out what your project expenditure is in respect of each recoupment. A recoupment may be an instalment under the agreement.

    Where you have total notional R&D deductions that exceed $100 million the amount used for the purposes of item 3 may be reduced. The amount of the reduction when combined with reductions under the feedstock and balancing adjustment rules cannot exceed the excess of notional R&D deductions over $100 million.

    When you notionally deduct further amounts related to this recoupment under the R&D tax incentive in future years, you will be required to amend your Company tax return 2020 in the Calculation statement at M, R&D recoupment tax to include a further amount of R&D recoupment tax. Further amendments will be required until either:

    • there is no more expenditure related to this recoupment, or
    • the amount of the extra tax recouped at M, R&D recoupment tax in the Calculation statement becomes equal to the amount of the government recoupment received.

    Item 4 R&D recoupment tax – 10% tax payable

    Enter at M item 4 R&D recoupment tax – 10% tax payable the extra tax required on your recoupment as calculated under Subdivision 355-G of the ITAA 1997.

    If you have claimed the R&D tax incentive at item 21 and you have received a government recoupment (such as a government grant or reimbursement) that relates to expenditure that you have claimed a notional deduction for under the R&D tax incentive, the income tax you are liable to pay on the recoupment will be increased. This is referred to as a clawback adjustment.

    The clawback adjustment for each project is capped for grants, so that the extra tax payable cannot exceed the amount of the grant, that on a pro rata basis, you received for that project. As a result, if the sum calculated for M for each project exceeds the amount of the grant received for that project (which relates to the R&D expenditure), the amount to be shown at M for that project will be the amount of the grant.

    Last modified: 28 May 2020QC 62349