techwitty r&d tax incentive presentation 2017

Research and Development (R&D) Tax Incentive

1. WhatistheResearch&Development(R&D)TaxIncentive?

1.1 Description

TheResearch&Development(R&D)TaxIncentiveisatargeted,generousandeasytoaccessentitlementprogramthathelpsbusinessesoffsetsomeofthecostsofdoingR&D.TheprogramaimstohelpmorebusinessesdoR&Dandinnovate.Itisabroad-basedentitlementprogram.ThismeansthatitisopentofirmsofallsizesinallsectorswhoareconductingeligibleR&D.

AbouttheProgram

2. AbouttheProgram

2.1 Overview

TheR&DTaxIncentiveprovidestargetedresearchanddevelopment(R&D)taxoffsetsdesignedtoencouragemorecompaniestoengageinR&D.

TheR&DTaxIncentivehastwocorecomponents.Entitiesengagedinresearchanddevelopmentmaybeeligiblefor:

• a43.5percentrefundabletaxoffsetiftheirturnoverislessthan$20millionperannumprovidedtheyarenotcontrolledbyincometaxexemptentities;or

• a38.5percentnon-refundabletaxoffsetforallothereligibleentities(entitiesmaybeabletocarryforwardunusedoffsetamountstofutureincomeyears).

2.2 Objectives

TheR&DTaxIncentiveaimsto:

• BoostcompetitivenessandimproveproductivityacrosstheAustralianeconomy

• Encourageindustrytoconductresearchanddevelopmentactivitiesthatmaynototherwisehavebeenconducted;

• Providebusinesseswithmorepredictable,lesscomplexsupport;and

• Improvetheincentiveforsmallerfirmstoengageinresearchanddevelopment.

2.3 Administration

AusIndustry(onbehalfofInnovationAustralia)andtheAustralianTaxationOffice(ATO)administertheR&DTaxIncentivejointly.AusIndustryregistersyourR&Dactivitiesandcheckthattheycomplywiththelaw.TheATOdetermineswhetherornottheexpenditureyouareclaimingforyourR&Dactivitiesiseligible.

2.4 Legislation

TheR&DTaxIncentiveisadministeredunderthefollowinglegislation:

• Division355oftheIncomeTaxAssessmentAct1997;and

• PartIIIoftheIndustryResearchandDevelopmentAct1986.

TheTaxLawsAmendment(ResearchandDevelopment)Bill2010ExplanatoryMemorandumprovidesaguidetotheinterpretationandintentofthesectionsofthoseactsthatrelatetotheR&DTaxIncentive.

TwolegislativeinstrumentsandtheiraccompanyingexplanatorystatementshavebeendevelopedtosupportadministrationoftheR&DTaxIncentive:

• IndustryResearchandDevelopmentRegulations2011

• IndustryResearchandDevelopmentRegulations2011-ExplanatoryStatement

• IndustryResearchandDevelopmentDecision-makingPrinciples2011

• IndustryResearchandDevelopmentDecision-makingPrinciples-ExplanatoryStatement.

EligibilitytoClaimtheIncentive

3. EligibilitytoClaimtheIncentive

Tobeeligible,entitiesmustsatisfyeachofthefollowingcriteria:

3.1 Criteria1:ApplicantEligibility(assessedbyATO)

Anapplicantmustbe:

• AcompanyincorporatedinAustralia;• AcorporationthatisanAustralianresidentfor

taxpurposes;• AforeigncorporationthatcarriesonR&D

activitiesthoughapermanentestablishmentinAustralia;or

• Acorporationactingastrusteeofapublictradingtrust.

YourR&Dmustbeundertakenonyourownbehalf,meaningyoumust:

• Beartechnicalandfinancialrisk;• Beabletoinfluenceorcontroltheconductand

directionoftheR&D;and• Eitherownorhaveeffectiveownershipofthe

R&Dresults,includingtherighttoexploittheresults.

ActivitiesmustbeundertakenwithinAustralia.Inexceptionalcircumstances,overseasactivitiesmaybedeemedeligible,however,aseparatesubmissionmustbemadetotheBoard,whichmustapprovetheseactivitiespriortothemoccurringoverseas.

EligibilityChecklist

Question1:Isyourbusinessincorporatedasacompany?

Yes. PleaseproceedtoQuestion2.No. YouarenoteligiblefortheR&Dtaxincentive.

Question 2: Is your company incorporated under Australian law or incorporated under foreign law but an Australianresidentforincomepurposes?

Yes. PleaseproceedtoQuestion3.No. YouarenoteligiblefortheR&Dtaxincentive.

Question3:Isyourcompanya‘ForProfit’entity?(i.e.youarenotaNot-For-Profitentitysuchasacharityorassociation?)

Yes. PleaseproceedtoQuestion4.No. YouarenoteligiblefortheR&Dtaxincentive.

Question4:Didyouincurexpensesofmorethan$20,000inthelastfinancialyear?

Yes. PleaseproceedtoQuestion5.No. YouarenoteligiblefortheR&Dtaxincentive.

Question5:Foryourindustry,couldyouconsiderthatyouhavebeencreatingneworimprovedproducts,processesand/orservicesaspartofgrowingyourbusiness? (i.e.areyoudoingsomethingdifferent towhat isavailable in themarketandbeinginnovativefromatechnicalperspectiveasopposetoacommercialperspective?).

NOTE:Thereisadifferencebetweentechnicalandcommercialinnovation.Ifyouarenotsureaboutthedistinctionbetweenthetwo,pleasecontactustodiscuss...

3.2 Criteria2:ActivityEligibility(assessedbyAusIndustry)

UndertheR&DTaxIncentive,adistinctionhastobemadebetweencoreandsupportingR&DactivitieswiththeadditionalrequirementthatcoreandsupportingR&Dactivitiesbereportedseparately.

3.2.1DefinitionofCoreActivities

CoreR&Dactivitiesareexperimentalactivities:

a. Whoseoutcomecannotbeknownordeterminedinadvanceonthebasisofcurrentknowledge,informationorexperience,butcanonlybedeterminedbyapplyingasystematicprogressionofworkthat:

i. Isbasedonprinciplesofestablishedscience;andii. Proceedsfromhypothesistoexperiment,observationand

evaluation,andleadstologicalconclusions;b. Thatareconductedforthepurposeofacquiringnewknowledge

(includingknowledgeorinformationconcerningthecreationofneworimprovedmaterials,products,devices,processesorservices).Furthertothisgeneralprinciple,someactivitiesarespecificallyexcludedfromqualifyingascoreR&Dactivities.

3.2.2DefinitionofSupportingR&DActivities

SupportingR&DactivitiesareactivitiesdirectlyrelatedtocoreR&Dactivities.Ifsupportactivitiesareundertakenfornormaloperationalreasons,theyonlyremaineligiblewherethedominantpurposeforconductingthemistosupportcoreR&Dactivities.

3.3 Criteria3:ExpenditureEligibility(assessedbyATO)

TheR&DTaxIncentiveisnotsubjecttoanexpenditurecap.However,foranyR&Dexpenditureabove$100million,companieswillonlybeabletoclaimataxoffsetatthecompanytaxrate,whichbasicallymeansthereisnoadditionalR&Dbenefit.

MostexpenditurerelatedtoR&Dactivitiesareeligible,includingsalaries,overheads,contractorcosts,feedstock,R&Dplantdepreciationamountandmaterials.

Applicantsmustmeettheminimumexpenditurethresholdof$20,000,althoughthisthresholdiswaivedifR&Discontractedtoaregisteredresearchprovider.

LodgementofApplications

4. LodgementofApplicationsYouregisterR&DactivitiesbylodginganapplicationwithAusIndustry.AusIndustryadministersregistrationfortheR&DTaxIncentiveonbehalfofInnovationAustralia.

4.1 ApplicationDeadline

YourapplicationforregistrationmustbereceivedbyAusIndustrywithintenmonthsoftheendofyourcompany’sincomeyearinwhichtheactivitieswereconducted.IfthedeadlinefallsonaSaturday,Sundayorapublicholiday,thedeadlinebecomesthenextworkingday.

4.2 ReviewofApplications

AusIndustryreviewsallapplicationsforregistrationfortimelinessandcompletenessincluding:

• Receiptwithinthestatutorydeadlines;• Scrutinisingforadequacyof:

o formcompletion;o descriptionofactivities.

• Thattheapplicationissubmittedbyanappropriateperson;and

• ThattheregistrationisconsistentwithpreviousfindingsmadebyInnovationAustralia.

ApplicantsfortheR&DTaxIncentiveself-assesswhethertheyareanR&DentityandtheeligibilityoftheircoreR&DactivitiesandsupportingR&Dactivities.InthemajorityofcasesAusIndustryacceptstheaccuracyoftheinformationprovidedintheapplicationformandregistertheactivities.However,AusIndustrycanchoosetoexaminearegistrationapplicationandthismayleadtoafindingbyInnovationAustraliaaboutsomeoralloftheactivitiesdescribedintheapplication.

AusIndustrygenerallymakesadecisiononregistrationwithin30daysofreceiptofahard-copyapplication,andgenerallywithin10daysiftheapplicationislodgedelectronicallyonline.AusIndustrysendsaletteradvisingoftheregistrationdecisiontoallapplicants.Ifapproved,thedateofthisletteristhedateofregistration.IncludedinthisletterisaregistrationnumbertobequotedontheATO’sR&DTaxIncentiveSchedule.TheregistrationnumberisuniquetotheR&Dentityforthatincomeyear.

Registrationofactivitiesdoesnot,byitself,rendertheactivitiesdescribedintheregistrationaseligibleR&Dactivities,norisitanindicationofcompliancewiththerequirementsoftheR&DTaxIncentive.Afterregistration,AusIndustrymayexaminearegistrationindetailandthismayleadtoaformalfindingbyInnovationAustraliaabouttheeligibilityofallorsomeoftheregisteredactivities.

Yourcompanymustkeepadequaterecordstosupporttheassessmentsyoumakeinyourapplicationforregistration.

KeepingRecords

5. KeepingRecordsIfyouintendtoregisterandclaimtheR&DTaxIncentive,youmustkeepadequaterecordstodemonstratetotheAustralianTaxationOffice(ATO)andAusIndustrythatyoudidcarryouteligibleresearchanddevelopment(R&D)activitiesandthatyoudidincureligibleexpenditure.

Yourrecordsmustbesufficienttoverify:thenatureoftheR&Dactivities;theamountofexpenditureincurredonR&Dactivities;and,therelationshipoftheexpendituretotheactivities.

5.1 KeepingRecordsaboutR&DActivities

TheR&DTaxIncentiveprogramoperatesonaself-assessmentbasis.Youareresponsibleforensuringthatyourregisteredresearchanddevelopment(R&D)activitiesmeettheprogram’seligibilitycriteria.

AformalR&DplanisnotmandatoryundertheR&DTaxIncentive.However,aspartofacompliancereview,AusIndustrymayaskyoutoproviderecordsthatshowthatyourcompany’sR&Dactivitieswerecarriedoutandwereeligible.

Yourcompany’srecordsmustbesufficienttoshowthattheclaimedR&Dactivitiestookplaceandthattheymetallaspectsofthelegislativedefinitionforeither‘coreR&Dactivities’or‘supportingR&Dactivities’.

Asyouselfassessyourcompany’seligibilityfortheprogram,youshouldaskyourself:

1. Domycompany’sactivitiesmeetallaspectsofthelegislativedefinitionforeithercoreR&DactivitiesorsupportingR&Dactivities?

2. HaveIretained,andcanIaccess,sufficientrecordstoshowthattheactivitiesmeetallaspectofthelegislativedefinitionforeithercoreR&DactivitiesorsupportingR&Dactivities?

5.2 WhichRecordsshouldIkeep?

IndecidingwhatrecordsarerequiredinordertodemonstratetheeligibilityofR&Dactivities,youshouldconsidereachaspectofthedefinitionsofcoreandsupportingR&Dactivity.Youshouldthenconsiderwhichrecordsareappropriatetodemonstratethatyourcompany’sactivitiesmeetthesedefinitions.

TechwittyR&DServices

6. TechwittyR&DServicesAtTechwittywehaveanumberofresearchanddevelopmentspecialiststoassistyouwithyourapplication.

Ourconsultantsandtaxagentswill:

1. Assessyoureligibility;2. DetermineandclassifythetypesofR&DActivities;3. AssessthenatureandextentoftheR&DActivities;4. Collectandcollatealloftherequisitedata;5. PrepareyourapplicationforLodgement;6. SubmityourapplicationtoAusIndustry;and7. LiaisewithAusIndustryandtheATOonyourbehalf.

ContactDetails

7. ContactDetails

Techwitty

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Web: www.techwitty.com.au