Transition from the R&D tax concession to the R&D tax incentive
We jointly administer the research and development (R&D) tax concession and R&D tax incentive with AusIndustry.
Before 1 July 2011, the R&D tax concession allowed companies to claim a tax deduction in their income tax return of up to 125% (and in some cases up to 175%) of eligible expenditure on R&D activities.
The R&D tax concession continues to apply and be administered for income years starting before 1 July 2011. As a result, R&D expenditure incurred in respect of R&D activities performed in years prior to 1 July 2011, must continue to be claimed under the R&D tax concession.
The R&D tax incentive provides R&D tax offsets to encourage more companies to engage in R&D and has two core components:
- a 43.5% refundable tax offset for certain eligible R&D entities with an aggregated turnover of less than $20 million per annum
- a 38.5% non-refundable tax offset for all other eligible R&D entities. Unused offset amounts may be able to be carried forward for use in future income years.
The rate of the R&D tax offset is reduced to the company tax rate (currently 30%) for that portion of an entity’s notional R&D deductions that exceeds $100 million for an income year. This change applies to assessments for income years starting on or after 1 July 2014 and before 1 July 2024.
Rules and provisions were introduced with the R&D tax incentive to:
- ensure that, despite the repeal of the R&D tax concession provisions, those provisions can still apply to certain things done (for example, expenditure that has been incurred) before they were repealed
- establish special transitional arrangements to broadly address some situations that extend over income years where the R&D tax concession provisions and the R&D tax incentive provisions apply.
- We provide information about transitional arrangements for:
- AusIndustry provides information about transitional arrangements for:
- registering activities
- assessments by AusIndustry and decisions by Innovation Australia
- existing certificates or determinations
- registering research service providers (previously known as a registered research agency).
- Transition from the R&D Tax ConcessionExternal Link
We, along with AusIndustry, provide information in relation to records you may need to keep for the R&D tax incentive. For more information on records you may need to keep in relation to your notional deductions see Research and development tax incentive - claiming.
AusIndustry has more information on record keeping requirements in relation to your R&D activities, see Keeping records on the AusIndustry website.
Assessments, decisions and rulings by the ATO in relation to the R&D tax concession
Amendments and objections
Amending or objecting to an assessment for a year of income commencing prior to 1 July 2011
The introduction of the R&D tax incentive included amendments to ensure that although the R&D tax concession provisions in sections 73B to 73Z of the Income Tax Assessment Act 1936 (ITAA 1936) ceased to apply from 1 July 2011, they will still apply to years of income commencing prior to this date.
As such, if your assessment relates to a year of income commencing prior to 1 July 2011, sections 73B to 73Z of the ITAA 1936 will continue to apply to those years. Your assessment for those years can be amended if it is necessary to adjust a claim made under those sections. Under section 175A of the ITAA 1936, you can also object to an assessment in relation to a claim made under sections 73B to 73Z of the ITAA 1936, unless it is a 'nil' assessment to which subsection 175A(2) of the ITAA 1936 applies.
A notice issued under section 73IA of the ITAA 1936 previously gave objection rights in relation to R&D tax offset claims, where you would otherwise have been prevented from objecting under subsection 175A(2) of the ITAA 1936. Although section 73IA of the ITAA 1936 will be repealed for years of income commencing on or after 1 July 2011, the Commissioner may continue to issue these notices for years of income starting prior to 1 July 2011. Subject to meeting objection timeframes, your right to object to a notice issued under section 73IA of the ITAA 1936 will also be maintained.
There are time limits for making amendments to your tax return, generally two years for small businesses and four years for other taxpayers. To give you certainty about your tax affairs, the law does not allow amendments (initiated by us or by you) outside the time limit, but you may be able to lodge an objection instead.
Time limits for lodging objections vary. In most cases it is at least 60 days from receipt of the related notice and, in the case of income tax assessments, it is two or four years after the lodgment date for the return (two years for most small businesses, four years for all other taxpayers).
Objecting to an assessment for a year of income commencing on or after 1 July 2011
For years of income commencing on or after 1 July 2011, section 355-700 of the ITAA 1997 modifies section 175A of the ITAA 1936 to give objection rights against an assessment made in relation to a R&D entity, to the extent that the assessment relates to the 43.5% refundable R&D tax offset. All other assessments are subject to the rules set out in section 175A of the ITAA 1936.
Rulings and advice issued prior to 1 July 2011
Advice and guidance
We offer different types of advice and guidance that give our view on how the laws we administer apply. These range from published guidance about how the law generally applies to advice given to a taxpayer about how the law applies to their particular circumstances.
Our advice is binding and provides the highest level of protection for taxpayers who rely on it. However, guidance is not binding as it provides more general information that assists taxpayers in a wide variety of circumstances to deal with their tax affairs.
If a taxpayer follows our advice or guidance that turns out to be incorrect or misleading, and they make a mistake as a result, they are entitled to certain levels of protection under the law.
The provisions introduced with the R&D tax incentive ensure that the R&D tax concession provisions continue to apply for years of income beginning prior to 1 July 2011. This means that if you have received advice or guidance from us in relation to sections 73B to 73Z of the ITAA 1936, you may continue to rely on this advice or guidance in relation to the prior years to which the advice or guidance relates.
ATO Interpretative Decision
An ATO Interpretative Decision (ATO ID) is a summary of a decision on an interpretative issue and sets out the Commissioner's view on the interpretation of the law on that particular issue. ATO IDs are produced to assist ATO officers to apply the law consistently and accurately to particular factual situations.
Although they are available on our website, they are not published as a form of advice. They are being made available for your inspection to meet freedom of information (FOI) requirements, because they may be used by an officer in making another decision. Although sections 73B to 73Z of the ITAA 1936 have now been repealed, an ATOID may still be relied on by an officer in making a decision in relation to years of income starting prior to 1 July 2011.