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R&D Tax Concession and Tax Credit

What is the R&D Tax Credit or Offset?

The new R&D Tax Credit will be effective after 1 July 2011 for the 2011/12 tax year (you will not be able to register for the new tax rebate until 1 July 2012). For more information about changes see Grant News: R&D Tax Credit Changes.

The R&D Tax Offset for the 2010/11 tax year is a broad‐based, market‐driven package to replace the R&D Tax Concession with a tax credit system.
This is how it works; you do the R&D, register your project and file for the rebate when you file your company tax to get up to 37.5 cents back on every dollar spent in eligible R&D.
You can apply and get a cash rebate even if you don't make a profit. The R&D Tax Credit is available to all companies with an annual turnover of less than $5m who spend up to $2m per year on R&D. Companies with greater than $5m are still eligible for the standard R&D Tax Concession of 125%.

Eligibility checklist (for 2010-11 tax year):

If you are able to answer YES to all the following questions, you are likely to be eligible to apply for and claim the R&D Tax Concession. If you answer NO to any of the questions, expenditure relating to the activities may NOT be eligible:

1. Are you a company incorporated in Australia, and not acting as a trustee for a trust (other than for a public trading trust)?
2. Have you prepared and maintained an R&D Plan in accordance with the Board's Guidelines?
3. Do the R&D activities you have undertaken involve the following:
- a technical problem that could not be resolved on the basis of publicly available information,
- an original idea to solve the technical problem,
- systematic experimentation in the form of testing or trials to resolve the technical uncertainty?

4. Have you maintained up‐to‐date records that substantiate the carrying on of these activities?
5. If you have undertaken foreign‐owned R&D, is a written agreement in place between your company and your grouped foreign affiliate regarding the undertaking of the R&D?
6. Will your company (or the relevant foreign company in the case of foreign‐owned R&D) bear both the technical and financial risk associated with its R&D?
7. Does your company (or the relevant foreign company in the case of foreign‐owned R&D) have control over its R&D project and effectively own the R&D results?
8. Will the R&D activities be to the benefit of the Australian economy and the results exploited on normal commercial terms?
9. If the systematic, investigative and experimental activities of the project are for the development of computer software, is the resultant software intended for multiple sale?
10. Has your company incurred eligible annual expenditure of $20,000 or more on R&D activities; if not, has the company contracted (Australian‐owned) R&D activities to a Registered Research Agency?
11. Is this application for registration being lodged within 10 months after the end of your company's income year?

How to claim:

Making a claim is a two‐stage process. An application for registration must first be made with AusIndustry. This must be done by 30th April following the tax year you are claiming (i.e. within 10 months). On receipt of a registration number, the R&D claim entry for your company tax return can then be lodged by your tax accountant.

Alternatively, contact us for the easy way to apply for grants.

How can I calculate my claim:

Due to the complex nature of how the ATO works out your claim we have put together our own tax calculator. Contact us if you need a copy.

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R&D Tax Concession and Tax Credit

Melbourne Office:

Level 10
50 Market Street
Melbourne, Victoria, 3000
Australia

Phone: (03) 9008 5937
Web: http://www.treadstone.com.au/

For more information on any of Treadstone's services for ICT businesses, or a quotation-including a minimum 10% discount to AIIA members -please submit a quotation request.