R&D Tax Incentive: A Checklist for Registering Your R&D Activities

If the financial year for your company ended on 31 December 2022, you have until the end of this month (31 October 2023) to register your eligible R&D activities. Eligible R&D activities must be registered with AusIndustry within 10 months of the end of your income year. If you don't register your R&D activities by the upcoming deadline, you will be unable to claim the tax benefit for eligible expenditures between January 2022 and December 2022.

To help you prepare for the upcoming deadline, we have created a quick checklist with everything you need to know about registering your R&D activities. If you have any questions or queries about the lodgement process, talk to one of our R&D tax specialists today.

☑ Is your business eligible to claim the R&D Tax Incentive?

The purpose of the R&D Tax Incentive is to encourage Australian innovation by providing a tax offset to encourage research and development activities. To be eligible to claim these offsets, your company must:

• Be an eligible entity; and
• Have spent at least $20,000 on eligible R&D activities.

Eligible entities are required to be incorporated under either an Australian or foreign law. If incorporated by a foreign law, the entity must be an Australian resident for income tax purposes or be a resident of a country with a double tax agreement.

☑ Have you conducted eligible R&D activities?

Core activities
You need to have conducted or planned to conduct one or more core R&D activities. A core R&D activity is an experimental activity:

• that is conducted for the purpose of generating new knowledge; and
• whose outcome cannot be determined in advance based on current knowledge, information or experience.

Supporting activity
You can also include supporting activities in your R&D claim, which are activities directly related to core R&D activities. This can include literature reviews used to refine your hypothesis before trial or the maintenance of equipment used in your experiments.

☑ What records are required for your R&D application?

In order to demonstrate the eligibility of your activities and associated expenditures, supporting documentation should be generated and maintained throughout the entire development cycle. You need to maintain documentation that proves:

• You performed eligible core and, where claimed, supporting R&D activities,
• You incurred eligible expenditures in relation to the submitted R&D activities; and
• Your R&D activities and expenditures met all other legislative requirements needed to claim the R&D Tax Incentive.

☑ Register your R&D activities with AusIndustry

All R&D applications must be submitted to AusIndustry via the R&D Tax Incentive customer portal, where you will be required to provide evidence of your eligibility and a project description of your eligible R&D activities, in addition to some financial disclosures, such as your aggregated turnover for the financial period. Once you have registered your activities, you will then be able to claim your tax offset by identifying your eligible R&D costs and completing the RDTI schedule in your company's tax return. Within the schedule, you will disclose a breakdown of your eligible R&D spend by category and other necessary disclosures including clawback amounts, associate expenditures, and aggregated turnover.

Eligible R&D activities must be registered with AusIndustry within 10 months of the end of your company's income year. While you can request an extension for your application, extensions of 14 days or more generally require exceptional circumstances and supporting evidence to justify the amount of time you are requesting. It is important to note that this process will not automatically result in you receiving an extension. If you need help meeting the deadline, we always recommend seeking assistance from an experienced R&D professional.

☑ Engage an experienced R&D Tax Advisor

Working with an experienced R&D Tax Advisor can offer a number of advantages, especially for new and emerging companies in the technology sector who may be looking to claim the R&D Tax Incentive for the first time. With 31 October quickly approaching, having a professional advisor in your corner could be the difference between successfully lodging your R&D application or missing the deadline altogether.

Here at Azure Group, we have built a strong reputation for helping innovative businesses access the R&D Tax Incentive. Our R&D experts have the knowledge and experience needed to maximise your claim and significantly reduce the risk of non-compliance for a greater chance of a successful application. If your business had a financial year end of 31 December 2022 and you think you conducted eligible R&D activities during the year, talk to our team today about claiming the R&D Tax Incentive.

Have you noticed our #FridayExpertTips? Here's one that relates to R&D Tax Incentive...

"The costs of innovation can be offset by the R&D Tax Incentive. It doesn’t matter if you’re in a lab, on a factory floor, or behind a computer – innovation is innovation! Talk to our team!"