1. R&D Tax Incentive
ATY Advisory

2. What is the R&D Tax Incentive?
Australian Government’s principal measure to encourage industry investment in research and development.
Jointly administered by AusIndustry and ATO.
It is a broad-based, market-driven entitlement program that aims to boost company competitiveness, improve productivity and deliver economy-wide benefits to Australia.

3. Introduction to the R&D Tax Incentive Scheme
Tax Benefits of undertaking R&D
Linking R&D activities to Tax Benefits
Timeline of claiming Tax benefits vs. conducted R&D
Up to 45% refundable tax credit
Permanent benefit of 15 c per dollar spent on R&D activities
Cash refund within days after filing company tax return
Provides R&D working capital by increasing operating cash flow
10 months after the end of financial year for the company when R&D activities occurred
Can be obtained successively for multiple financial years

4. Calculation of R&D Tax Offset - Example
Tax Profit/Loss $
$50 000 $0
-$50 000 -$ -$
(Add back) R&D Expenditure $
Subtotal $ $ $
Taxable income or loss
Company Tax Payable
$90 000
$75 000
$60 000
$45 000
$30 000
Refundable R&D Tax Offset
Tax Cash Refund
$15 000

5. What is the R&D Tax Incentive?
45% refundable tax offset
Aggregated Turnover < $20M
40% non-refundable tax offset
Aggregated Turnover
> $20M

6. R&D Tax Incentive Application Process
Submission to ATO (Company Tax Return Lodgement)
Submission to AusIndustry (R&D Registration)

7. R&D Tax Incentive Application Process – Submission to AusIndustry
7/9/2019
R&D Tax Incentive Application Process – Submission to AusIndustry
Receive Innovation Australia Registration Number
Upon AusIndustry approval, receive an Innovation Australia Registration Number (IR)
Use the Innovation Australia Registration Number (IR) to lodge Company Tax Return
R&D Registration Form Submission
Lodged within 10 months of the end of financial year in which R&D is conducted. (April 30 for June Year Ends)
Can declare future R&D to be done in future financial years with estimated budget expense

8. R&D eligibility criteria
Is your Company a propriety limited enterprise? (ie not a trust, partnership, sole trader)
Did you carry out eligible R&D activities in the past financial year?
Did you incur a minimum of $20,000 in R&D expenditure?

9. R&D Activities (experimentation): Core Activity Supporting Activity
Technical Objectives
New Knowledge
Technical Unknowns
R&D Activities (experimentation): Core Activity Supporting Activity

10. New products or processes to be generated by conducting the project
New Knowledge
New products or processes to be generated by conducting the project
Must not be achievable based solely on publically available information. Private information is acceptable
Examples: new applications, algorithms, platforms, processes, portals etc.

11. Technical outcomes that cannot be known without conducting experiments
Technical Unknowns
Technical outcomes that cannot be known without conducting experiments
Must have encountered technical challenges/ difficulties (not social sciences)
Examples: performance and efficiency of systems, functionality of process, integration of software etc

12. Experimentation Development of IT products Testing of technologies
Trial runs
Integration of Packages

13. Definitions of R&D activities
Core R&D
Experimentation to generate new knowledge by adopting scientific methodologies
Supporting R&D
Activities related to core R&D or activities related to dominant purpose of undertaking R&D
Core R&D

14. Core R&D activities may include:
Development of software
Unit tests, dry test runs
System integration
Payments to contractors
Cloud hosting/integration

15. Supporting R&D activities may include:
Literature searches or reviews that help design the experiment
Background research
Planning and overseeing the experiment
Designing and producing test subject, equipment, prototypes etc. to be used in the experiment

16. Excluded Software R&D
Subject to the same eligibility requirements as other R&D but with an exclusion.
Software developed for an applicant’s internal administration are excluded as core. This may include:
Business applications (payroll, accounting, invoicing, ordering, quality control, reporting, information management)
Managment Information Systems
Enterprise Resource Planning Software

17. Excluded Software R&D The exclusion is not intended to apply to:
Software of an applied nature (ie. that forms part of an electrical or mechanical device such as industrial equipment or consumer products)
Software developed for the purpose of sale on a commercial basis
Software directly related to the delivery of services to customers

18. Eligible expenses Staff time and corresponding wages Company Overheads
License fees of software used in R&D
Contractor costs – including applications developed on your behalf
Travel expenses

19. Case Study Example Objective New Knowledge Technical Unknowns
Development of a web and mobile e-commerce application
Objective
Development of new software and system enabled tools
Development of live stocktake
Development of customised search engine tool
New APIs and Algorithms developed
New Knowledge
Integration of individual features
User interface and user experience design
Search engine functionality
Technical Unknowns

20. Eligible R&D Expenditure $55,000
Case Study Example
Labour Costs $20,000
Overheads $20,000
Contractor $10,000
Other $5,000
Eligible R&D Expenditure $55,000
CASH REFUND of up to $24,750

21. R&D examples
The following examples of IT projects that may be eligible for the R&D tax incentive:
Database management
Server management and cloud services
Software development, including
Mobile and web applications
Development of portals

22. About ATY Advisory
Our team has extensive knowledge about the R&D tax incentive.
Our broad experience with a variety of industry sectors will provide us with the best possible understanding to maximise your potential tax savings.
To date, we have successfully claimed over $6m in R&D expenditure

23. ATY Advisory Team Technical Experts Financial Experts Senior Advisors
Analyse technical data
Prepare technical deliverables
Financial Experts
Analyse eligible expenditure
Maximising your benefit
Senior Advisors
Provide insight to evaluation of regulatory systems
Insight of practical and administrative protocols connected to ATO

24. Contingent fees
Our fee structure is on a fully contingent basis. This means fees are only charged as a small percentage of a successful R&D claim, if no R&D is claimed, we will not render any fees.