You may need to make adjustments to your tax return if you have received a government recoupment, your R&D activities have produced either marketable products or products that have been applied to your own use, or you are registered for GST.
Clawback Adjustments
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 on the recoupment. This income tax increase is called a 'clawback adjustment'.
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.
Feedstock Adjustments
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 either marketable products that you supply to someone else or products you apply to your own use.
The feedstock adjustment applies to any of the following:
- expenditure on goods or materials (feedstock inputs) that are transformed or processed during R&D activities in producing one or more tangible products (feedstock outputs)
- expenditure on energy that is input directly into that transformation or processing
- the decline in value of assets used in acquiring or producing the feedstock inputs.
The feedstock provisions apply to both core R&D activities and supporting R&D activities that transform or process feedstock inputs. The provisions aren't confined to mass production activities.
Where 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.
If you are registered for GST
If you are registered for GST, you can claim a GST input tax credit for your R&D expenditure. The amount of this input tax credit is excluded from your calculation of notional deductions. If you aren't registered for GST and not entitled to claim input tax credits, this exclusion does not apply.