These instructions will help you use and complete the Excel spreadsheet version of the R&D schedule, which in turn will help you complete the items for R&D expenditure on the Company tax return 2007.
Who must complete an R&D schedule?
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
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You must complete and lodge an R&D schedule if you make a claim on your company tax return for R&D activities under the R&D tax concession that is, sections 73B to 73Z of the Income Tax Assessment Act 1936 (ITAA 1936).
Who can claim the R&D tax concession?
You may be entitled to claim the concession for your company if it is:
- an eligible company that has registered its research and development activities with the Industry, Research and Development Board (IRDB) through AusIndustry for the income year ended 30 June 2007, or
- the head company of a consolidated group where at least one of the subsidiary companies in the group is an eligible company and is registered with the IRDB (section 73BAB of ITAA 1936).
An eligible company is a body corporate incorporated under a law of the Commonwealth or of a state or territory (subsection 73B(1) of ITAA 1936).
An eligible company that incurs expenditure as a trustee or nominee cannot claim the concession unless it is a trustee of a public trading trust (subsection 73B(3) of ITAA 1936).
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You can only claim the tax concession for expenditure on eligible R&D activities. The IRDB and AusIndustry determine whether activities are eligible R&D activities.
You must lodge an application for registration of R&D activities with the IRDB within 10 months of the end of the income year.
You must register before you make a claim in the company's tax return. If your company chooses to claim the R&D tax offset, it must do so in its return of income (which includes the R&D schedule) and it must be registered at that time.
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Who administers the R&D tax concession?
The R&D tax concession is jointly administered by AusIndustry, part of the Department of Industry, Tourism and Resources (DITR) and the Tax Office.
For information about how to register for the R&D tax concession and about what R&D activities qualify for the concession:
For information about claiming the R&D tax concession:
Before you complete the schedule
Before you start to use the Excel spreadsheet version of the R&D schedule, you will need to make certain calculations and complete certain parts of the company tax return. Read through the points below. Although not exhaustive, they list important information.
Five items on the Company tax return 2006 relate to the R&D tax concession:
Item 7 Reconciliation to taxable income or loss
- D Accounting expenditure in item 6 subject to R&D tax concession
- L R&D tax concession - not including label M
- M Incremental R&D (additional 50%) deduction
- Y R&D tax offset, if chosen
- At item 7 Reconciliation to taxable income or loss on the Company tax return 2007, complete D Accounting expenditure in item 6 subject to R&D tax concession. For information about how to complete this item, see 'Preliminary calculation - label D'.
- Calculate your aggregate R&D amount:
- to ensure the company has incurred the required amount ( that is, more than $20,000), and
- to determine whether your expenditure qualifies for the 100% or 125% deduction under sections 73B(14) and (15) and 73BA(3) of ITAA 1936.
- Calculate how much has been spent in each category that qualifies for a deduction under section 73B of ITAA 1936.
The amounts used as the base amounts in the calculation of the R&D tax concession deductions for consolidated groups must have been worked out on a consolidated basis, with all intra-group transactions eliminated. They must not be calculated on an aggregated basis, simply aggregating each group company's expenditure.
Only one R&D schedule is required for a consolidated group.
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Section 73C of ITAA 1936 operates to 'claw back' the benefits of the R&D tax concession for companies that have received a government grant - other than a cooperative research centre (CRC) program grant - for the same project. If you need to make any clawback calculations, you must make them in accordance with section 73C.
You will need to determine whether the company (or any company required to be grouped with it) received, or was entitled to receive, a recoupment of, or a grant in respect of any amounts claimed under the R&D tax concession.
To find out how the clawback rules operate where a subsidiary leaves or joins a consolidated group, see sections 73BAE of ITAA 1936 and section 701-5 of Income Tax Assessment Act 1997 (ITAA 1997).
If clawback applies, you may find it useful to read 'Important notes on Part A of the schedule' and 'PART C Government grants and recoupments - other than CRC program grants'.
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Adjust the amount of expenditure incurred in accordance with the prepayment provisions in sections 82KZL to 82KZMF of ITAA 1936 and subsection 73B(11) of ITAA 1936.
Determine any portion of the expenditure ineligible for the additional 25% component in accordance with the intra-group mark-up provisions (subsections 73B(14AA) - (14AD) of ITAA 1936).
Expenditure on overseas R&D activities is covered in sections 39EC and 39ED of the Industry Research and Development Act 1986 (IRADA 1986). Companies must have an overseas provisional certificate from the IRDB before they can claim overseas expenditure.
Determine amounts that are available for deduction as depreciation under sections 73BA, 73BC, 73BG, 73BH, 73BJ and 73BN of ITAA 1936 and Divisions 40 and 42 of ITAA 1997.
Determine how much of technology expenditure is deductible in accordance with subsections 73B(12A)-(12B) of ITAA 1936.
Determine whether the company's incremental expenditure makes it eligible for the incremental tax concession under section 73Q of ITAA 1936.
Determine which entities are in the company group in accordance with sections 73L, 73M and 73R of ITAA 1936.
A head company of a consolidated group will also need to consider these provisions (for example, where it is grouped with other entities with less than 100% control or ownership).
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Expenditure that is not at risk
Apply section 73CA of ITAA 1936 to any expenditure for which the company was not at risk.
See sections 73E, 73F and 73G of ITAA 1936 to determine expenditure that qualifies for roll-over relief.
Adjust expenditure amounts to take account of any entitlement you have to GST credits. See Division 27 of ITAA 1997.
Last modified: 24 Jun 2008QC 18884