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Australia

Australia offers a 43.5% refundable tax credit for Small and Medium Enterprises (SMEs), or a 34 - 42.5% non-refundable credit for large companies with over AU$20 million in turnover. Full technical justifications must be submitted for each project claimed.

AusIndustry reviews activity eligibility, whereas the Australian Taxation Office processes the tax credit through the Company Tax Return.

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Layer 1 Australia SME LC Generosity 13% 6% Ease of Application L e v el of r e vi e w or enquiry e xpec t ed? A r e other R&D In c enti v es a v ailabl e ? Australia SME Australia LC Is f o r eign- o wned R&D eligibl e ? R&D mu s t o c cur in the c ountry Is p r eapp r o v al r equi r ed? Previous financial years claimable 1 1
Small and Medium Enterprises (SME)
Large Companies (LC)
43.5% Tax Credit 34% – 42.5% Tax Credit
Benefit Overview
Australian Small and Medium Enterprises are eligible to claim a 43.5% tax credit on eligible R&D expenses. If the company is loss making, the incentive can be offered in cash. Cash refunds are capped at AU$4 million. Large Companies in Australia are eligible to claim a 34-42.5% tax credit on eligible R&D expenses. The figure is dependent on eligible spend as a percentage of total spend in year. This incentive is a non-refundable tax credit, no matter the tax position of the claiming company.
Eligible Claim Period
  • Australia uses a retrospective application scheme and applications must be lodged within 10 months of the end of the relevant fiscal year.
  • Tax credits may be carried forward, subject to meeting the standard tax offset carry-forward rules.
Application Process
  • R&D activities are registered with AusIndustry by submitting an online Registration of R&D Activities Application.
  • Full technical justification pertaining to the relevant R&D is required.
  • Once registered, a unique registration number is provided, which must be included in the R&D Tax Incentive Schedule, lodged with the company tax return with the Australian Tax Office.
  • Companies must register activities for each income year they want to claim the offset.
Eligibility Requirements
  • Eligible R&D activities are classified as either “Core” or “Supporting” activities. In order to register eligible activities, you must have undertaken (or be intending to undertake) at least one Core R&D activity.
  • Core activities are experimental activities where outcomes cannot be known or determined in advance; are determined using a systematic progression of experimental work; and are conducted for the purpose of generating new knowledge.
  • Supporting activities may qualify if they are undertaken to directly support eligible Core R&D activities.
Eligible Expenditure

Eligible expenditure is incurred by the eligible company during the income year and can include:

  • Salaries, contracted work and other direct costs related to R&D
  • Materials transformed or consumed during activities
  • Decline in value of assets used in R&D activities
  • Contributions to Cooperative Research Centres and Research Providers
Regulatory Body Practices
  • AusIndustry reviews activity eligibility, whereas the Australian Taxation Office processes the tax credit through the Company Tax Return
  • Appropriate contemporaneous documentation must be maintained to evidence the R&D activities and expenditure incurred.
  • Expect a review of claim at least every 4 years. This is higher for larger value and target industries (software, mining, construction), but an expectation exists here for high levels of contemporaneous documentation.
  • Despite the programme being retrospective and self-assessed, advanced assurance can be gained through Advance Finding applications.
Issues to Consider
  • Who was the R&D conducted for? Did you have ownership of results, control over activities or bear the financial risk?
  • R&D conducted in Australia on behalf of a foreign company may be claimed, depending on the countries and agreements in place.
  • Where was the R&D activity undertaken? Generally, all activities must be undertaken in Australia in order to qualify. An “Overseas Finding” can be sought for activities undertaken offshore but these must not equate to more than 50% of the entire project cost.

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