Research & Development Tax Incentive

Overview of the RDTI

The most common inquiry concerning the Research and Development Tax Incentive (RDTI) involves interpreting what satisfies the necessary scope of an eligible core R&D activity. It is also important to note that any application can include more than one core R&D activity. The RDTI provides relief for those businesses or individuals who seek to resolve scientific and technological uncertainty while employing methodologies that follow a systematic approach.

Resolving Scientific and Technological Uncertainty

For instance, when seeking to resolve scientific and technological uncertainty, there is this expectation that the competent industry professional operating within the same field of research believes there exists uncertainty in finding a resolution to any specific hypothesis.

Intent and Creation of New Knowledge

There is also a need to explain why a business or the individual undertaking this eligible core R&D activity exists. The intent must be to create new knowledge and new and improved processes, services, or goods. In extension to eligible core R&D activities, some activities that may not meet the necessary criteria of a core activity could satisfy the threshold for what constitutes a supporting activity. Supporting activities include those proven to support and deemed integral to the core R&D activity.

Eligibility Criteria

In relation to eligibility and beyond the scope of the uncertainty and systematic approach criteria, the applicant must incur a minimum cost of $50,000 during the calendar year. The applicant can claim back 15% to offset any pending tax obligation or to ‘cash out’ these tax credits if operating in a taxable loss position.

Tax Credit Utilisation and Cashing Out

Interested parties often inquire about the excess use of tax credits when already applied to offset a current tax obligation and what is required for the business or individual to ‘cash out’ these RDTI tax credits. The RDTI tax credits similarly operate to excess tax losses carried forward from one financial year to the next. If excess tax credits exist, these are carried forward and used to offset any future tax obligation.

Refundability Rules

When referring to the ‘cashing out’ of losses, this option only applies to businesses or individuals operating with a taxable loss for the year of the claim and who satisfy the broader refundability rules, for example, start-ups. Regarding the broader refundability rules, a limit exists to the extent of the RDTI tax credits refundable to the amount paid in employment-related taxes.

Compliance and Lodgment

In so far as compliance and lodgment of a RDTI claim, there is a requirement to submit a general approval following the first income year to which the application relates. Moreover, a supplementary return is also required, along with lodging the business (or individual) tax return.

At Andersen, we have assisted our clients in successfully navigating what can often be a complex and niche area of practice. Given our experience, we understand what makes for a successful claim. Our team, led by Serjit Singh, is always ready to have a chat to establish if this incentive is right for your business activity.