An amount of the R&D tax offset you have claimed in any year is clawed back in the current year if one or more of the following clawback events happens during the year: you have received a recoupment from a government source, you have a feedstock adjustment for tangible products, or you have an assessable balancing adjustment for an R&D asset.
Recoupment Amounts
A clawback adjustment arises in a year you — or an entity connected or affiliated with you — either receives or is entitled to receive a recoupment from an Australian Government agency, or a state or territory body, and the recoupment relates to expenditure incurred on activities for which you have received an R&D tax offset. The clawback is worked out on the amount of R&D expenditure recouped.
Feedstock Adjustments
A feedstock adjustment arises where you obtain an R&D tax offset for feedstock expenditure incurred on R&D activities, and during an income year those activities produce products that you (or a connected entity) supply to someone else or apply to your own use. The feedstock provisions apply to both core and supporting R&D activities that transform or process feedstock inputs, and are not confined to mass production activities.
Where a feedstock adjustment is triggered, you must include an amount in your assessable income — this may be in the current or a future income year, depending on when the output is sold or applied. Feedstock revenue is calculated as:
Market value of the marketable product × (Cost of producing feedstock output ÷ Cost of producing marketable product)
Balancing Adjustments for R&D Assets
A balancing adjustment happens when you stop holding a depreciating asset (e.g. when you sell it). The clawback is worked out on the termination value of the R&D asset at that time which exceeds its adjustable value. The amount is capped to ensure the clawback does not apply to the extent that the asset has appreciated in value. If the asset was partially held for R&D purposes, the clawback amount is reduced proportionally.
Calculating the Clawback Amount
The clawback amount is included in your assessable income and matches the incentive or premium component of the R&D tax offset that relates to the clawback event. In broad terms: start with each amount being clawed back, separate it into the notional deduction being clawed back per claim year, then calculate the difference between your original offset and what your offset would have been without those deductions. The result is grossed up and included in assessable income.
Where Adjustments Don't Apply
Clawback adjustments do not apply to:
- Cash flow boosts received (not a recoupment of expenditure on R&D activities)
- JobKeeper payments received for paid employees (already subject to the at-risk rule)
- JobKeeper payments based on business participation
- Recoupments under the Cooperative Research Centre (CRC) Program
Sources: ATO — Clawback of R&D tax offset
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