An annual registration must be submitted to Ausindustry within ten months of the conclusion of the applicant's financial year. The registration must provide details of the R&D activities conducted in the year under review.

You must spend at least $20,000 in a financial year to be eligible for the R&D Tax Incentive, except in some very limited circumstances.

There is no upper limit on R&D expenditure (however, different rules apply when claims exceed $100 million).

Businesses engaged in eligible R&D are entitled to a 43.5% refundable tax offset, which equates to:

• Cash refunds equal to 43.5 cents for every dollar of R&D spending, when the company has tax losses;

or

• Tax offset equal to a benefit of 16 cents for every R&D dollar spent when the company has taxable profits, for companies with a turnover less than $10 million. Turnover between $10 million and $20 millionth tax benefit is equal to 13.5 cents, turnover greater than $20 million, the tax benefit is 8.5 cents for very R&D dollar spent.

A unique registration number is provided by Ausindustry to be included in the R&D tax schedule. Then the R&D tax schedule is prepared. This contains the expenditure incurred during the year on the R&D activities.

• Salaries and on-costs of employees 
• Contractor fees
• Administrative overheads
• Depreciation of plant and equipment used in the R&D activities
• Payments to Research Service Providers (RSP)
• Other costs directly related to the R&D activities

R&D tax benefit calculation*:

(1)       R&D spend                    $500,000

(2)       Tax profit                       $50,000

Company tax @25% on (2)    =$12,500         

(3) R&D benefit 43.5% of $500,000      =$217,500

(4)       Tax on $550,000          =$151,250

(5)       Tax rebate (3) – (4)        = $66,250

(6)       Plus tax liability removed     = $13,750

(7)       Overall tax benefit (5) + (6)     = $80,000

*Assumes company turnover less than $10 million.