Keeping evidence for your R&D Tax Incentive claim
The R&D Tax Incentive is a refundable tax offset for eligible entities undertaking innovative research & development activities. This incentive helps to cover eligible R&D expenditure for businesses who can demonstrate their ability to meet stringent criteria.
Who is eligible for the R&D Tax Incentive?
Companies with an aggregated turnover below $20 million may receive an R&D tax incentive of up to $4 million per annum.
For businesses applying to register for the R&D Tax Incentive, it’s essential that you keep records or evidence to demonstrate that your R&D activities meet eligibility requirements.
Some of the key eligibility requirements include:
- The purpose of conducting your R&D was to generate new knowledge
- Your activities followed a scientific method
- That an experiment was needed to determine the outcome of your activities
Why do we need to demonstrate eligibility?
Any business that applies for the R&D grant is subject to examination. This means that you could be required to present records of the eligible R&D activities carried out over the specific financial year you’re claiming against. These records are also known as contemporaneous records and are used to evidence your activities as well as self-assess whether they meet eligibility criteria.
Should your business undergo examination, you will be required to hand over your records to the government within 30 days of a request being filed. If you are unable to provide such evidence within this timeframe, you can apply for an extension of 14 days. For this to be approved, you will need to explain why you are unable to produce your records in the initial period.
What records do we need to keep?
Evidence requirements differ between businesses depending on industry, the nature of your operation and the specific R&D activities you are undertaking. However, each applicants’ records must be, at least, evidence that the activities did take place and that they meet the legislative definition for either ‘core R&D activities’ or ‘supporting R&D activities.’
Core R&D Activities are experimental activities:
“(a) 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:
(i) is based on principles of established science; and
(ii) proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and
(b) that are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).”
Learn more about core R&D activities here.
Supporting R&D Activities are activities directly related to “core R&D activities.
“(1) Supporting R&D activities are activities directly related to *core R&D activities.
(2) However, if an activity:
(a) is an activity referred to in subsection 355-25(2); or
(b) produces goods or services; or
(c) is directly related to producing goods or services;
The activity is a supporting R&D activity only if it is undertaken for the dominant purpose of supporting *core R&D activities.”
Learn more about supporting R&D activities here.
Making your claim a Synnch
Ensuring you are eligible to apply for the R&D Tax Incentive and having the appropriate records to support your claim is a lengthy and often confusing process.
At Synnch, we help you to streamline this process with a complete R&D solution to ensure you’re meeting ATO and AusIndustry compliance in order to maximise your R&D claims.
With an innovative platform to help you record your activities backed by a team of industry experts to help you along the way, Synnch will ensure you’re on track throughout the entire year. This ensures that when tax time comes, submitting your claim is a Synnch 😉