You may need to calculate a feedstock adjustment under the R&D tax incentive. A feedstock adjustment is an amount you include in your assessable income. It applies when you obtain an R&D tax incentive offset for your feedstock expenditure incurred on R&D activities, where those activities produce one or more marketable products that are either:
- applied to your own use.
The feedstock adjustment applies where amounts are incurred and claimed as a notional R&D deduction on the following:
- goods or materials (feedstock inputs) transformed or processed during R&D activities in producing one or more tangible products (feedstock outputs)
- energy that is input directly into that transformation or processing
- the decline in value of depreciating assets.
The feedstock provisions apply to both core and supporting R&D activities that transform or process feedstock inputs. The provisions are not confined to mass production activities.
If a feedstock adjustment is triggered, you must include an amount in your assessable income. This may be in the current or in a future income year, depending on when the output is sold or applied.
It is important to keep detailed records of your feedstock expenditure to help work out your feedstock adjustment, especially if the feedstock adjustment may be triggered in a year after the R&D activities are conducted.
Specifically, records you may need to keep for this purpose are:
- invoices from the sale of the marketable products
- working papers documenting
- the market value of products you apply to your own use
- valuations of all goods and materials subject to processing or transformation and feedstock outputs
- calculation of feedstock expenditure and resulting feedstock adjustment
- records showing energy usage input directly into the transformation or processing
- records of the R&D process, including the flow-through of materials or goods, subject to processing or transformation, to the marketable product
- records that describe the processing or transformation activities.