TCF NEWSLETTER | 12.03.2020
R&D Tax Incentive
The 30th April R&D Tax incentive lodgement deadline looms fast and why good record keeping is paramount.
Please be reminded that if you have not already prepared and lodged your 2018/19 R&D “registration of R&D activities” application with AusIndustry, it is important to note that the 30th April lodgement deadline is looming fast for companies with a standard 30th June reporting year end.
It is also important to note that the R&D Tax Incentive is a self-assessment program requiring claimants to keep contemporaneous records that track the progress of their R&D activities and quantifies the costs associated with the activities being claimed. If you don’t have the records to substantiate your claim you are running a risk so it’s important that this is reviewed and established now.
Simple things like:
- populating an annual R&D project plan,
- writing monthly technical reports,
- taking photos evidencing stages of prototype work and
- completing weekly time-sheets for R&D staff
is paramount in maintaining your successful participation on the program as well as good business practice as it establishes and values your greatest asset; your IP.
Don’t get caught out!
Here are a few reasons why claims can be rejected after review or audit:
Poor and/or insufficient R&D record keeping – Records must be contemporaneous; projects must be broken down and tracked by activities (core, supporting and ineligible); Weekly time-sheets are required to confirm the percentage of time /salary to be claimed by R&D staff that relate to eligible R&D activities; Technical reports should be written regularly that evaluate the results of the experiments including knowledge gap evidence to prove the knowledge is not already in the public domain; evidence that the R&D manager or CTO is a competent professional in the field and not playing industry catch up or learning a new technique.
Whole of project claim approach – claiming the total costs of running the business whilst it’s in start-up phase with no revenue on the basis that it’s all risky and contingent on the success of the business.
Claiming business model innovation in absence of high levels of technical or scientific risk – just because the new business model disrupts the old and uses technology to do so does not constitute eligible R&D under the program.
Claiming unpaid associated party fees – if an entity or person is associated in any way with the R&D entity the fees for R&D services must be paid by the 30th June in the year of the activity to allow the benefit to be claimed and paid. Otherwise it must be carried over in the tax return until the payment is made, after which the benefit can be claimed in later years.
Claiming late superannuation payments – Claiming superannuation on R&D staff where the super was not paid on time or before the end of the financial year. Generally, compulsory superannuation payments paid late (outside the time limits) can’t be claimed as a business deduction, which also means that any late quarterly super payments relating to eligible R&D staff may not be eligible to be claimed under the R&D Tax Incentive. If the financial year’s last quarter’s super is not paid by 30 June (ie, acknowledged by the complying superfund as received by 30 June), then that contribution cannot be claimed as a deduction in that year and must be claimed in the following year – don’t get caught out.
If you require assistance with your 18/19 claim preparation or establishment of compliant record keeping for your 19/20 R&D activities or if you would like to discuss these matters further please contact Gerry Frittmann – Managing Director at TCF Services on firstname.lastname@example.org or contact your R&D Tax consultant at TCF Services.
Tax agents registration number 39849006
P: 02 8219 4900