Research and Development (R&D) Tax and Business Incentives
EY assists companies to access Australian Government R&D tax offsets, grants and other incentives that support company growth.
These programs support companies from a wide variety of industry sectors in Australia including information technology, manufacturing, mining, oil and gas, life sciences, food and beverage, financial services, technology start-ups and more.
R&D Tax Incentive
Australia’s foremost R&D support program is the R&D Tax Incentive, which offers R&D tax offsets for eligible entities. We offer services to assist companies access the R&D Tax Incentive including:
- Assistance in assessing company and project eligibility, including identification of eligible R&D activities and expenditure
- Preparation of documentation to support registration of R&D activities and claiming the R&D tax offset
- Evaluation of supporting documentation in the context of strict compliance requirements
R&D Tax Incentive claims can be subject to regulatory scrutiny to maintain integrity of the program. Our proven claim process helps our clients reduce the risk of non-compliance while enhancing R&D entitlements.
We also assist companies to resolve information requests, risk reviews and audits from the relevant government agencies as required.
- Am I eligible for the R&D Tax Incentive?
A company may be eligible for the R&D Tax Incentive for an income year if it meets the following criteria:
- It is a company incorporated in Australia, is an Australian resident or has a permanent establishment in Australia.
- Eligible R&D activities (defined below) have been conducted in Australia during the year (some overseas R&D activities may also be claimed by obtaining an overseas advanced finding).
- Eligible expenditure has been incurred on R&D activities.
- Appropriate records are maintained to evidence the R&D activities and associated expenditure incurred.
Activities that meet the following criteria may be eligible for the R&D Tax Incentive:
- Is the activity being undertaken experimental? An experiment aims to test a hypothesis or idea through a systematic scientific process.
- Can the outcome of the experiment be known or determined in advance on the basis of publicly available knowledge, information or experience?
- Are the activities being conducted for the purpose of generating new knowledge? This includes new knowledge in the form of new or improved materials, products, devices, processes or services.
- For whom are the activities conducted? A company is generally only entitled to a tax offset for R&D activities conducted for itself and not for another entity.
Our experienced team can assist your company to identify eligibility to claim the R&D Tax Incentive.
- What R&D tax offset rate is available?
For income years starting on or after 1 July 2016, for R&D expenditure up to $100 million in an income year, companies can access a:
- 43.5% refundable tax offset if they have an annual turnover of less than $20 million.
- 38.5% non-refundable tax offset for all other eligible companies. Unused non-refundable offset amounts may be able to be carried forward to future income years.
This tax offset is available to companies that are not controlled by income tax exempt entities.
Our R&D tax professionals can assist you to determine which R&D tax offset rate applies.
Changes to corporate tax rate
On 3 May 2016, the government announced in the 2016–17 Budget that it will reduce the corporate tax rate progressively from 30 per cent to 25 per cent over a number of years. These proposed changes to the corporate tax rate will impact the realised benefit of the R&D Tax Incentive for smaller companies.
Corporate tax rate for the 2016–17 income year
Corporate tax rate for the 2017–18 income year
1 A company must be in a sufficient tax loss position with no outstanding tax liabilities to access the full refundable offset.
2 If a company’s tax liability is reduced to zero, a cash refund might be able to be accessed for any unused refundable offset amount.
3 If a company’s tax liability is reduced to zero, excess offset may be carried forward into future income years.
- How does the R&D Tax Incentive program work?
Our dedicated R&D tax professionals will assist you to navigate the claim process while reducing any impact on your company, and enhancing eligible benefits.
1. Identify eligible R&D activities
- Assess eligibility to claim the R&D Tax Incentive
- Identify eligible core and supporting R&D activities
- Evaluate supporting documentation in the context of compliance requirements
- Provide advice for real time activity identification and documentation processes>
2. Register as an R&D entity
- Assist company to lodge its R&D registration application within 10 months after the company’s financial year end.
3. Lodge R&D schedule with tax return
- Calculate the eligible expenditure incurred on R&D activities
- Prepare supporting schedules to claim the R&D tax offset through the company income tax return
- Prepare an end-of-claim file to document the methodology of the claim
4. Receive cash or tax offset
- The company should receive the R&D benefit once the tax return is processed by the Australian Taxation Office
- Frequently Asked Questions
How do I know if my company is eligible?
Give us a call! The first step of EY R&D tax and grant services is to assess your company’s eligibility. As R&D and grant professionals we are able to assist you to determine whether you are eligible for an incentive.
I have already received a government grant, can I still benefit from the R&D Tax Incentive?
Yes, our team will discuss any relevant clawback provisions that apply when a company accesses government grants and the R&D Tax Incentive scheme concurrently.
What differentiates the eligibility for a 38.5% or 43.5% offset?
Eligibility for the 43.5% refundable tax offset or the 38.5% non-refundable tax offset depends on the company’s aggregated turnover defined under taxation legislation. Broadly, aggregated turnover is the combined annual turnover of all affiliated and connected entities of the company in an income year. Our R&D tax professionals can assist you to determine your aggregated turnover and applicable R&D tax offset rate.
When is my R&D application due?
R&D activities must be registered within 10 months after the end of your company’s (taxable) financial year. For example, if your financial year ends on 30 June, the R&D application must be lodged by 30 April the following year.
I think we conducted an eligible project a few years ago, can we claim?
A company must register eligible R&D activities on an annual basis. For example, if you commenced a project that extends over two financial years, you must claim each of the activities in that project prior to the deadline for each respective financial year.
What does it cost to get assistance from EY R&D and business incentives team?
We have a range of competitive and cost-effective fee options that can be tailored to each company’s specific needs. Please contact us for an obligation free quote.
When do the rate changes take effect?
The Budget Savings (Omnibus) Act 2016 reduced the 45% refundable tax offset and the 40% non-refundable tax offset respectively to 43.5% and 38.5% for the income years commencing on or after 1 July 2016. For example:
- For companies with an income year ending in June, the first income year the rate reduction applies is the year commencing 1 July 2016.
- For companies with an income year ending in December, the first income year the rate reduction applies is the year commencing 1 January 2017.
- For companies with an income year ending in March, the first income year the rate reduction applies is the year commencing 1 April 2017.
Grants and other business incentives
Our experienced grant professionals assist companies to access federal and state-based grants and business incentives, including the Accelerating Commercialisation Grant (and other grants as part of the Entrepreneurs Infrastructure Programme), Export Market Development Grant (EMDG), Early Stage Innovation Companies (ESICs) and more.
Our services comprise:
- Initial feasibility reviews
- Full grant application preparation
- Negotiation and submission with the relevant government body
- Ongoing compliance
- Development and support
Please contact our experienced team which can assist your company to identify which grants and other business incentives may apply.
Why use EY?
Our team of R&D tax and grant professionals are experienced in assisting small, medium and large companies in Australia operating in a wide variety of industries. We make the R&D tax and grants process seamless and easy for you, ensuring you enhance the benefit to which your company may be entitled. Our experience translates into a cost effective and efficient claim process for your company that limits the risk of non-compliance.
Getting the right advice in the early stages can avoid a long and costly application process. We help you assess your project against complex criteria and identify eligibility to access R&D tax and business incentives. Please contact a member of our team for more information.