Companies need to self-assess their R&D activities against the legislative requirements before registering. This post provides a practical checklist that may assist in self-assessing whether your activities are eligible R&D activities.
What Makes an Activity Eligible?
To register eligible R&D activities, you need to conduct or plan to conduct at least one core R&D activity. Some activities are excluded from being core R&D activities. Any supporting R&D activities must directly relate to your core R&D activities. You must specify your activities when you register them for the R&D Tax Incentive.
Eligible R&D activities may occur over several income years — you may conduct an eligible core R&D activity over more than one year, and supporting activities may occur in different years to your core R&D activity.
Eligibility Checklist
To be eligible, you must do the following:
- Conduct or plan to conduct at least one core R&D activity that meets the legislative definition in Section 355-25 of the ITAA 1997
- Assess that your core R&D activity is not an excluded activity — market research, routine testing, and internal administration software are common exclusions
- Register your core R&D activity with AusIndustry within 10 months of the end of your income year
- Only register supporting R&D activities that directly relate to a core R&D activity — and in some cases, ensure they are conducted for the dominant purpose of supporting core R&D
- For overseas activities — obtain a positive Overseas Finding before claiming a tax offset for those activities
Self-Assessment Considerations
When self-assessing your core R&D activity, consider whether:
- The outcome of your activity genuinely cannot be known in advance by a competent professional
- You have conducted background research to confirm the outcome is not publicly known
- Your work follows a systematic progression: hypothesis → experiment → observation → evaluation → logical conclusions
- You are generating new knowledge, not simply applying existing knowledge to achieve a commercially certain outcome
- Your records are contemporaneous and would withstand scrutiny from an AusIndustry assessor
Determinations
Determinations set out how the law is interpreted and applied when administering the R&D Tax Incentive program. For you, this could mean certain activities are already assessed as eligible without needing your own determination. It is worth checking whether any existing determinations apply to your industry or type of activity.
Source: business.gov.au — Assess if your R&D activities are eligible
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