R&D TAX INCENTIVE
The R&D Tax Incentive is the Federal Government main incentive program designed to incentivize Australian based companies to innovate and develop new products, processes and services across any industry sector. If your research and development activities carry financial risk associated with technical or scientific risk you are probably eligible to receive a benefit.
Don’t be fooled into thinking that R&D is restricted to pure scientific invention. If you are undertaking experimental activities for the purpose of generating new knowledge, it makes no difference if you’re working in a factory, office, laboratory or out of your garage as you may qualify for a tax offset which is payable in cash if your business is a start-up or under $20m in annual revenue.
Download our guide for Understanding the R&D Tax Incentive here
What is the R&D Tax Incentive?
The Research and Development Tax Incentive (R&D Tax Incentive or R&DTI) provides tax offsets to incentivise local companies to undertake R&D. The financial risk associated with the technical or scientific risk required to develop new products, processes and services is claimable and the benefit is delivered in cash at a rate of 43.5% for start-up companies under $20m in annual revenue.
Applications open on the 1st July for companies with a standard financial year wishing to claim their FY 2021-22 activities as per the following rates of return:
- Annual revenue <$20m – Company Tax Rate: 25% – Refundable Tax Benefit: 43.5% (if matched by tax losses) or 18.5% (when trading in profit)
- Annual revenue $20m-$50m – Company Tax Rate: 25% – Non-Refundable Tax Benefit/2 tier benefit: 8.5% on eligible R&D expenditure which accounts for up to 2% of total company expenses and an additional 16.5% on eligible R&D expenditure exceeding the 2% baseline.
- Annual revenue >$50m – Company Tax Rate: 30% – Non-Refundable Tax Benefit/2 tier benefit: 8.5% on eligible R&D expenditure up to 2% of total company expenses and an additional 16.5% on eligible R&D expenditure exceeding the 2% baseline.