How does the R & D credit/offset system work?
Generally, the R&D tax incentive allows a small company to claim a 45% refundable tax offset for eligible activities. The incentive is quite concessional, compared to the value of a standard deduction of 30%.
A couple of the key requirements:
- Total deductions relating to the activity for a year must be at least $20,000;
- You must register with AusIndustry within 10 months after the close of an income year; and
- You must be undertaking “Core R&D Activities” (definition below).
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
- that are conducted for the purpose of generating new knowledge (including about creating new knowledge or improved materials, products, devices, processes or services).