The R&D Tax Concession is the Federal Government’s principal incentive to companies undertaking R&D within Australia. The R&D Tax Concession allows eligible companies (incorporated in Australia) to deduct up to 125% (175% on incremental expenditure subject to conditions) of eligible expenditure incurred on R&D activities.
Registration for a R&D plan
Activities claimed under the R&D Tax Concession are required to be the subject of an R&D Plan. This requirement was introduced to reinforce the need for companies to think strategically about their R&D as a critical and ongoing part of their businesses.
The requirement for an R&D Plan applies to all activities commencing on or after 1 July 2002. R&D activities that are undertaken which are not included in an R&D Plan are not eligible for the R&D Tax Concession.
R&D Tax Offset
The R&D Tax Offset allows small companies to obtain a cash rebate equivalent to the R&D Tax Concession deduction (including the Premium Concession). In most cases, the tax offset will be equal to 37.5 cents in the dollar for each dollar of R&D expenditure. For example, a company with $200,000 of R&D expenditure may be entitled to a cash rebate from the ATO of up to $75,000. The R&D Tax Offset is available to eligible companies with an annual group turnover of less than $5 million and annual group R&D expenditure of up to $1 million.
175% Premium Concession
In broad terms, the R&D tax concession legislation provides that where a company increases its R&D expenditure above the average of its R&D expenditure for the previous 3 years, the amount of the increase above the previous 3 year claim average may be deducted at 175%, instead of 125%.
How PwC can help you
Our R&D Tax specialists will assist your company to identify eligible R&D activities and associated expenditure. We will then assist you to prepare all the necessary documentation including the Application Form and your company’s R&D Plan.
PwC can also offer assistance in the event of an ATO or AusIndustry audit drawing on our team’s extensive R&D Tax Concession experience.
