1. Archivision Conference R&D Tax Concession Presentation
July 2010
Archivision Conference R&D Tax Concession Presentation
Amanda Hocking, Partner
PricewaterhouseCoopers Adelaide
PwC

2. Today’s Agenda Overview of the R&D Regime
July 2010
Today’s Agenda
Overview of the R&D Regime
How does R&D apply to the architecture industry?
Methodology for making an R&D claim

3. Overview of the R&D Tax Concession
July 2010
Overview of the R&D Tax Concession

4. Overview of the R&D Tax Concession
A self assessing, entitlement-based government concession
Jointly administered by Innovation Australia and the Australian Taxation Office
Enables eligible companies to claim a basic deduction of 125% which is equivalent to 7.5c per $1 spent on R&D activities
No claim
125%
Base R&D Benefit
30c
30c
Net Cost to Company
62.5c
62.5c
Normal Tax Benefit
70c
7.5c

5. Overview of the R&D Tax Credit
July 2010
Overview of the R&D Tax Credit
In the May 2009 budget, the Commonwealth government announced its Powering Ideas platform, which included replacing the existing R&D Tax Concession with an R&D Tax Credit.
The Federal Government has tabled new legislation dealing with the R&D Tax Credit, but this did not pass through the Senate in its June sitting.
Two core components (increasing the base benefit)
a 40% non-refundable R&D tax offset (equivalent to 10c in the dollar net cash benefit)
a 45% refundable R&D tax offset if R&D entity’s aggregated turnover is less than $20 million (equivalent to 15c in the dollar net cash benefit)

6. What is Eligible R&D? – “Tax R&D”
Under the R&D Tax Concession:
SIE activities
The activities must be undertaken in a systematic, investigative and experimental manner
They must contain elements of innovation or high levels of technical risk
They must be conducted for the purpose of acquiring new knowledge or creating new or improved materials, products, devices, processes or services
Directly related activities
Other activities carried on for “a” purpose directly related to the SIE activities

7. What is Eligible R&D? – “Tax R&D”
Under the R&D Tax Credit:
Core R&D activities are experimental activities:
whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:
is based on principles of established science; and
proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and
that are conducted for the purpose of generating new knowledge (including knowledge about the creation of new or improved materials, products, devices, processes or services)

8. What does “innovation” mean?
Activities are innovative if they involve an appreciable degree of novelty.
Innovation may be present where:
The work is seeking previously undiscovered phenomena, structures or relationships
The work is attempting to apply existing knowledge or techniques or technology in a new or different way
The outcomes are likely to benefit more than one organisation
In the architecture industry this could include:
Environmentally sustainable design (achieving AGBR and Green Star ratings)
Façade design and complexities associated with other floor plate considerations

9. What does “technical risk” mean?
Technical risk addresses the principle of uncertainty. Accordingly, high levels of technical risk may be present where:
It is uncertain which technical option may yield the desired outcome
Whether the technical objective will be achieved
The methodology to success is unknown in advance
There is a risk of failure
In the architecture industry this could include:
Technical challenges in the design of structural and functional design elements
Complexities in the integration of various design elements to the clients overall requirements
Interaction of geotechnical considerations within broader design constraints
Trialling and testing of proposed designs or solutions, and making modifications as required

10. R&D Plan Documentation Requirements
July 2010
R&D Plan Documentation Requirements
To claim the R&D Tax Concession, companies must have R&D Plans in place
Part A – R&D Plan Authorisation
A list of all R&D projects proposed to be undertaken including an overview of the company’s strategic business objectives and a signed statement of approval
Part B – R&D Project Plans
State the technical objective of the project and the background of the technical gap or problem to be overcome by the project and the nature of the technical risk or innovation
A company can refer to, and use, existing project documentation

11. R&D Application & Expenditure
To claim the R&D Tax Concession, companies must lodge an R&D Application with AusIndustry within 10 months of the financial year end
Types of Expenditure that can be claimed
Salary
Plant depreciation and plant leasing
Contractors
Other – Expenditure “directly” related to carrying on the R&D activities, including a portion of overheads

12. How does R&D relate to the architecture industry?
July 2010
How does R&D relate to the architecture industry?

13. R&D Projects Indicators of R&D projects in the architecture industry
The design and development of novel structures integrating many design
elements, such as:
Incorporation of Evidence-based Design (EBD) in the overarching design and construction
World class facilities – unique design (e.g. sports grounds)
Stimulating environments
Sustainable development – integrating efficient and ecologically sustainable use of resources and energy
Combining multiple buildings of synergistic sizes and scale to create a new space
Special vibration, acoustic and lighting considerations
Occupational health and safety considerations
Security and accessibility issues
And many more…..

14. R&D Activities Typically, R&D activities include:
Project identification and initiation
Conceptualisation
Design and Development
Testing and trialling
Post-trial modifications and enhancements
Conclusion of the project
Examples of R&D activities relating to the architecture industry:
Brief and schematic design
Design development
Preparation of construction documentation
Contract administration

15. Methodology for making an R&D claim
July 2010
Methodology for making an R&D claim

16. R&D Methodology
PwC have a proven methodology for undertaking R&D tax concession claims
Our overall approach is outlined below:
Identify and scope eligible R&D
Step 1
Review & prepare R&D Project Plans and supporting documentation
Step 2
Preparation & lodgement of R&D Tax Concession Application
Step 3
Identify eligible expenditure & preparation of documentation
Step 4
Debrief & recommend modifications to existing processes
Step 5