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How clawback adjustments work

Last updated 8 February 2023

Explains when an adjustment applies, what clawbacks do, and where adjustments don't apply.

When an adjustment applies

A clawback adjustment applies if:

  • you receive – or are entitled to receive – a government recoupment (such as a grant or reimbursement) for eligible R&D expenditure
  • you have claimed the R&D tax incentive tax offset for this eligible R&D expenditure (or decline in value of notional deductions if the expenditure was for a depreciating asset used in R&D activities).

What clawbacks do

Clawback doesn't decrease the grant or offset you receive; rather, it increases your assessable income by an amount for the notional deduction that an R&D entity received or is entitled to receive in relation to the recoupment. This is called a 'clawback adjustment'.

The clawback adjustment also applies to you if the recoupment belongs to an entity that is connected or affiliated with you, or you are affiliated with.

Where adjustments don't apply

A clawback adjustment doesn't apply to:

  • cash flow boosts you receive as it is not a recoupment of expenditure incurred on or in relation to certain activities
  • a JobKeeper payment you received for your paid employees as the payment has already triggered the at-risk rule. (The total expenditure you can claim as a notional deduction for your wage expenditure has already been reduced by its receipt on application of the at-risk rule.)
  • a JobKeeper payment you received based on business participation as the payment is not a recoupment of expenditure incurred on or in relation to certain activities.

Also, recoupments you receive under the Cooperative Research Centre (CRC) Program are exempt from the clawback adjustment.

When we say you in this guide, we are referring to a company that meets the definition of an R&D entity. For more information about R&D entities, see Research and development tax incentive – who can claim.

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