Enjoy the benefits of the research and development tax incentive
In a competitive environment, companies must continue to innovate in order to reduce costs, improve efficiency, increase asset life and develop new products to survive. This drive for an increased competitive position often produces readily identifiable research and development (R&D) activities within a company such as new products, processes or services. In order to be eligible for the R&D tax incentive, you must be operating as an Australian-based company that has at least one eligible core R&D activity carried out in Australia. The company must also incur a minimum of $20,000 on eligible R&D expenditure.
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. The activities must also be conducted for the purpose of generating new knowledge, including new knowledge in the form of new or improved materials, products, devices, processes or services.
Phases of the typical R&D project
A technical problem is identified in the business
There is uncertainty around how to solve the problem
A plan is developed for a potential solution
An experiment is conducted to see if the proposed solution works
The knowledge gap is either solved or remains unsolved and requires a new hypothesis to be developed
We’ve put together a series of questions that our R&D assessors will look for when reviewing potential claims.
- Was a scientific experiment carried out?
- Were you trying to achieve something unknown or whether something previously untried would be effective?
- Were you trying to solve a technical problem?
- Did the experiment employ the scientific method?
- Was the purpose of the experiment to generate new knowledge?
- In order to generate new knowledge, were you aiming to create new or improved materials, products, devices, processes or services beyond what is currently available in the industry?
- Did the experiment involve an unknown outcome or a technical risk?
- Is the outcome you are seeking unavailable on a commercial basis?
- Is there a risk that the experiment may fail to produce the outcome you are hoping to achieve?
If you answered yes to these scenarios, the activity is a core R&D activity. You should retain contemporaneous documentation to demonstrate each of the points outlined above. If you answered no to any of these, the activity is not a core R&D activity, however, the activity may qualify as a supporting R&D activity. Please get in touch with us to learn more about your eligibility.