Clawback adjustment guide

A clawback adjustment applies if:

• you receive – or are entitled to receive – a government recoupment (such as a grant or reimbursement) for eligible research and development (R&D) expenditure.
• you have claimed the R&D tax incentive tax offset for this eligible R&D expenditure (or decline in value notional deductions where the expenditure was for a depreciating asset used in R&D activities).

Clawback does not decrease the grant or offset you receive; rather, it increases the income tax you are liable to pay on the recoupment. This income tax increase is called a 'clawback adjustment'.

A clawback adjustment does not apply to:

• cash flow boosts you receive as it is not a recoupment of expenditure incurred on or in relation to certain activities
• a JobKeeper payment you received for your paid employees as the payment has already triggered the at-risk rule – the total expenditure you can claim as a notional deduction for your wage expenditure has already been reduced by its receipt
• a JobKeeper payment you received based on business participation as the payment is not a recoupment of expenditure incurred on or in relation to certain activities.

Find out about:

• how you determine if a clawback adjustment is required
• the timing of the clawback adjustment
• how you calculate the clawback adjustment
• the interaction between clawback and R&D partnerships
• the interaction between clawback and consolidation
• transitional rules that may apply
• whether recoupments you receive are assessable income
• other requirements you may need to meet to claim the R&D tax incentive.

When we say you in this guide, we are referring to a company that meets the definition of an R&D entity. For more information about R&D entities, see Research and development tax incentive – who can claim.

Determine if a clawback adjustment is required

A clawback adjustment under Subdivision 355-G of the Income Tax Assessment Act 1997 (ITAA 1997) arises if, during an income year, you either receive or are entitled to receive a recoupment from an Australian government agency, or a state or territory body, (other than under the CRC program) and all of the following apply:

• The recoupment (such as a reimbursement) relates to expenditure incurred on certain activities or the recoupment (such as a grant) requires expenditure to either be or have been incurred on certain activities.
• You have claimed the R&D tax incentive in relation to the expenditure (or decline in value notional deductions where the expenditure was for a depreciating asset used in those activities).

To work out if you need to make a clawback adjustment, you must work through these three steps:

• Step 1 – have you received or are you entitled to receive a recoupment during the income year?
• Step 2 – is the recoupment from an Australian government agency or a state or territory body?
• Step 3 – have you or a related entity, claimed the R&D tax incentive tax offset for expenditure that relates to the recoupment?

If you answer yes to steps 1, 2 and 3, you will need to make a clawback adjustment. If you have answered no to any of these questions, you will not need to make a clawback adjustment at this point in time.

However, if you have answered yes to steps 1 and 2, you may need to make a clawback adjustment in the future if you later satisfy step 3.

Step 1

You may be required to make a clawback adjustment if in an income year you receive or are entitled to receive a recoupment that is either a:

• recoupment of expenditure incurred on certain activities (including R&D activities)
• recoupment that requires expenditure to be incurred or to have been incurred on certain activities (including R&D activities).

If you do not satisfy this requirement, you do not need to make a clawback adjustment and do not need to work through steps 2 and 3.

Recoupment

A recoupment as referred to in Subdivision 355-G of the ITAA 1997 is defined in section 20-25 of the ITAA 1997. There are two broad categories of recoupment as defined:

• a recoupment of your expenditure that has been incurred and includes a full or partial reimbursement, refund or recovery of expenditure – in Subdivision 355-G this is referred to as a recoupment of expenditure incurred on certain activities
• a grant in respect of your expenditure – in Subdivision 355-G this is referred to as a recoupment that requires expenditure to be incurred or to have been incurred on certain activities.

See also:

• Section 20-25 of the ITAA 1997 for the definition of recoupment

Recoupment of expenditure incurred

If you have received or are entitled to receive a recoupment of all or some of the expenditure that you have already incurred on your R&D activities you may need to make a clawback adjustment. A recoupment of this type, which could include reimbursement, refund or recovery of expenditure, will typically be retrospective, as it is paid to you after expenditure has been incurred.

This type of recoupment restores you to the position you would be in if you had not incurred that expenditure (to which the recoupment relates). As a result, you have not experienced any financial detriment in relation to the expenditure to the extent that it has been recouped.

Recoupment that requires expenditure to be incurred or to have been incurred

The second type of recoupment is where the recoupment you receive or are entitled to receive is a recoupment that requires a specified amount (the project expenditure) to be incurred or to have been incurred on certain activities (which include R&D activities). This form of a recoupment is often referred to as a grant.

A grant provides funding for specific purposes. Often, a grant is conditional on you spending a specified amount (project expenditure) on certain activities. The grant may be for an amount that is equal to, greater than or less than the project expenditure. A grant can be made in an income year before, at the same time or after related expenditure has been incurred.

A grant is in respect of your expenditure if there is a sufficient nexus between the expenditure and the grant. A material reason for the payment of the grant must be the expenditure.

Receive or entitled to receive

You receive a recoupment when it is actually paid to you.

You are entitled to receive a recoupment when you are unconditionally entitled to that recoupment.

If you have applied for a government grant and have been notified that your application for funding has been approved this does not necessarily mean that you are entitled to receive the grant at that point. Grant programs are often paid in instalments. Each instalment may be contingent or conditional on certain events or milestones occurring which may include expenditure being incurred or proposed to be incurred within a certain timeframe.

You are entitled to receive a grant instalment when you have met all the conditions that must be satisfied for the instalment to be made, to the satisfaction of the entity paying the grant. You are not entitled to receive a grant instalment if you have not met all conditions that need to be met before the instalment can be paid.

Even if the grant is subject to a repayment obligation that may arise in the future, that alone does not affect your entitlement to the grant and it would still be considered for clawback purposes.

See also:

• Section 355-435 of the ITAA 1997
• Section 355-440 of the ITAA 1997
• Section 355-445 of the ITAA 1997

Step 2

You only need to make a clawback adjustment if the recoupment is from either:

• an Australian government agency
• a state or territory body (STB).

A variety of Australian Government assistance programs provide support for R&D entities undertaking R&D activities. Even if an assistance program does not necessarily specify that an objective of the funding is to support R&D activities, a clawback adjustment may still be required.

Many of these programs will also support activities other than R&D activities. A clawback adjustment will not be required to the extent that the funding is received for activities that are not R&D activities.

If you have received a recoupment but it is not from an Australian government agency or an STB, you do not need to make a clawback adjustment and you do not need to work through step 3.

Australian government agency

Where we say 'an Australian government agency' we mean any of the following:

• the Australian Government
• a state or a territory
• an authority of the Australian Government
• an authority of a state or a territory.

AusIndustry, as a division of the Department of Industry, Innovation and Science is one such government agency that has a range of programs designed to support innovation within Australian industry. These programs may support R&D activities through:

• grants for expenditure that qualify for the R&D tax incentive
• other forms of support that result in a recoupment of expenditure that qualifies for the R&D tax incentive tax offset.

If you have received funding from an AusIndustry program that supports R&D activities as outlined above, you may need to make a clawback adjustment.

You do not need to make a clawback adjustment for recoupments received under the Cooperative Research Centres Program.

See also:

• For information about the funding programs provided by the Department of Industry, visit the grants & programs section on business.gov.auExternal Link.

State or territory body (STB)

Division 1AB of the Income Tax Assessment Act 1936 (ITAA 1936) sets out the ways that a body can be an STB.

A body is an STB if it is a company limited solely by shares and all the shares are owned by one or more government entities.

A body that is not a company can also be an STB if it is established by state or territory legislation and it meets certain other requirements about the distribution of profits and assets only to one or more government entities or if one or more government entities has certain powers regarding the management of the body.

A body that is not a company and is not established by state or territory legislation can also be an STB if it meets certain requirements about ownership held by one or more government entities and if one or more government entities has certain powers regarding voting and the management of the body.

See also:

• For the definition of government entity, refer to section 24AT and section 24AU of the ITAA 1936.
• For more information about the five different ways that a body can be an STB, refer to
  • Section 24AO of the ITAA 1936
  • Section 24AP of the ITAA 1936
  • Section 24AQ of the ITAA 1936
  • Section 24AR of the ITAA 1936
  • Section 24AS of the ITAA 1936.
   
• For more information about step 2, refer to
  • Section 355-435 of the ITAA 1997
  • Section 355-440 of the ITAA 1997.
   

Step 3

You need to make a clawback adjustment if all or some of the expenditure for which you have received the recoupment is also expenditure that has been taken into account in working out your R&D tax incentive tax offset in one or more income years.

You also need to make a clawback adjustment if you have received or become entitled to receive a recoupment for expenditure that has been taken into account in working out R&D tax incentive tax offsets obtained by certain related entities in one or more income years.

Expenditure is taken into account in working out an R&D tax incentive tax offset if you or certain related entities can notionally deduct this expenditure under Division 355 of the ITAA 1997 (notional deductions). These notional deductions may be available for the expenditure itself or for the decline in value for R&D assets (if the expenditure incurred was to acquire R&D assets). The notional deductions that may be taken into account working out your R&D tax incentive tax offset are:

• R&D expenditure (including expenditure to a registered service provider) in the current year
• decline in value of R&D assets (including R&D partnership assets) where expenditure is for the acquisition of an R&D asset
• R&D expenditure associated with the recoupment incurred an earlier year
• CRC contributions.

If the relevant requirements are met and your notional deductions are less than $20,000, the notional deductions you can take into account when working out your R&D tax incentive tax offset are limited to:

• notional deductions for expenditure incurred to a research service provider, and
• notional deductions for CRC contributions.

See also:

• Amounts you can claim

Expenditure not at risk

In some cases, if you receive or are entitled to receive a recoupment, section 355-405 of the ITAA 1997 may apply to prevent deductions from being claimed for R&D expenditure or earlier year associate R&D expenditure. If you are unable to claim the R&D tax incentive for any expenditure related to the recoupment because section 355-405 of the ITAA 1997 applies (the expenditure is not at risk), you do not meet the requirements of step 3 and do not need to make a clawback adjustment.

In other cases when you receive or are entitled to receive a recoupment, section 355-405 may not apply to prevent deductions from being claimed for R&D expenditure or earlier year associate R&D expenditure. In these circumstances, you may still need to make a clawback adjustment if you meet the relevant requirements.

If you do not meet the requirements of step 3 you do not need to make a clawback adjustment at present. However, if you have answered yes to steps 1 and 2, you may need to make a clawback adjustment in the future if you later satisfy the requirements of step 3. For example, you may not be entitled to claim the R&D tax incentive tax offset for expenditure in the current year, but you may be able to claim the R&D tax offset in the following income year. If this occurs, you will need to make a clawback adjustment when you also satisfy the requirements of step 3, which will require you to amend your company tax return for the previous income year.

Related entities

When working out if the need for a clawback adjustment will arise, you also need to consider whether you have received or are entitled to receive any government recoupments in relation to expenditure that has been taken into account in working out the research and development tax offset for:

• an R&D entity that is connected with you
• an R&D entity that is an affiliate of yours or an R&D entity that you are an affiliate of.

An R&D entity includes a company. An individual, partnership or trust cannot be an R&D entity and therefore cannot claim the R&D tax incentive (with the exception of a corporate trustee of a public trading trust).

See also:

• Who can claim – for more information on R&D entities.

Connected with you

You are connected with another entity if any of the following applies:

• you control the other entity
• the other entity controls you
• you and the other entity are controlled by the same third entity.

You control a company if you, your affiliates, or you together with your affiliates, have either:

• shares and other equity interests in the company that give you and/or your affiliates at least 40% of the voting power in the company
• the right to receive at least 40% of any income or capital the company distributes.

You also control a company if you, your affiliates, or you together with your affiliates have the right to acquire shares or other equity that interests in the company that give you and/or your affiliates either:

• shares and other equity interests in the company that give you and/or your affiliates at least 40% of the voting power in the company
• the right to receive at least 40% of any income or capital the company distributes.

See also:

• Aggregation
• Grouping for aggregate turnover purposes

An affiliate of you

A company is your affiliate if, in relation to the affairs of its business, it acts, or could reasonably be expected to act, in either of the following ways:

• in accordance with your directions or wishes
• in concert with you.

A company is not your affiliate merely because of the nature of the business relationship you and the company share.

See also:

• Affiliates
• section 355-450 of the ITAA 1997

Timing of the clawback adjustment

To work out in which income year you need to make a clawback adjustment to pay extra income tax on your recoupment, you must identify the ‘trigger year’.

The trigger year is the year that you receive the recoupment that relates to R&D activities or the year that you are entitled to receive that recoupment if this occurs in an earlier income year.

Often, you will be entitled to receive a recoupment in the same income year that it is received. However, it is possible that you may be entitled to receive a recoupment in an income year earlier than the income year that you actually receive the recoupment. If this occurs, the year that you are entitled to receive the recoupment is the trigger year.

If your recoupment is paid in instalments over more than one income year you may have more than one trigger year. You are required to make a clawback adjustment for each trigger year.

The extra income tax on the recoupment is payable in the trigger year, regardless of whether you claim the R&D tax offset in the same, an earlier or later income year. As a result, you may need to amend your past income tax assessments in some circumstances to make the clawback adjustment.

See also:

• Receive or entitled to receive

Calculate the clawback adjustment

Once you have determined that clawback applies and the timing of the clawback adjustment, you will next need to calculate the amount of your clawback adjustment.

The clawback adjustment is an amount of extra income tax at the rate of 10% of the amount of expenditure which relates to the recoupment for which you have received the R&D tax incentive. To work out your clawback adjustment, you first need to identify your 'R&D expenditure' (that is relevant to the recoupment), as the extra income tax of 10% is imposed on this amount.

The first step to identifying your 'R&D expenditure' is to work out whether your recoupment is a:

• recoupment of expenditure incurred on or in relation to certain activities or
• recoupment that requires expenditure to be incurred or to have been incurred on certain activities.

You would have considered what type of recoupment you have when determining whether a clawback adjustment is required under step 1.

Recoupment of expenditure incurred

A recoupment of this type could include reimbursement, refund or recovery of expenditure incurred.

If you have received a recoupment of expenditure incurred on certain activities (including R&D activities), your R&D expenditure that is relevant to your clawback adjustment is the expenditure that has been recouped to the extent that both the following apply:

• You have claimed
  • a notional deduction for that expenditure under Division 355 of the ITAA 1997, and/or
  • the notional decline in value (if the expenditure relating to the recoupment was for an R&D asset) under Division 355 of the ITAA 1997.
   
• The notional deductions and/or notional decline in value have been taken into account in working out the R&D tax incentive tax offset obtained for one or more income years.

If only some of your expenditure has been recouped, for example you have only been partially reimbursed for R&D expenditure you have incurred, then your R&D expenditure that you use when calculating your clawback adjustment is limited to the amount of expenditure that has been recouped or reimbursed, rather than the total R&D expenditure.

Recoupment that requires expenditure to be incurred

This form of a recoupment is often referred to as a grant that provides funding for specific purposes. If your recoupment requires expenditure to be incurred on certain activities (including R&D activities), your R&D expenditure for these purposes is the expenditure that is required to be incurred to the extent that both the following apply:

• You have claimed
  • a notional deduction for that expenditure under Division 355 of the ITAA 1997, and/or
  • the notional decline in value (if the expenditure relating to the recoupment was for an R&D asset) under Division 355 of the ITAA 1997.
   
• The notional deductions and/or notional decline in value have been taken into account in working out your R&D tax incentive tax offset for one or more income years.

If you have a grant that is paid in two instalments over more than one income year (or trigger year), you will need to identify the R&D expenditure for each income year to calculate your clawback adjustment. In this circumstance, you do not include R&D expenditure that you have already taken into account to work out your earlier clawback adjustment in the following year. The example below shows how R&D expenditure is identified in these circumstances.

If you have received or are entitled to receive a recoupment in relation to expenditure that has been taken into account in working out the research and development tax offset for certain related entities, this will affect your clawback adjustment.

See also:

• Related entities

Cap for grants

If you have received a recoupment that is a grant then a cap applies to the amount of the extra income tax. This cap applies to ensure the amount of extra income tax you pay on your grant cannot exceed the amount of the grant that, on a pro-rata basis, is deemed to relate to the R&D expenditure. This is done by using the following formula to determine the maximum amount of the extra income tax:

Net amount of the recoupment x (R&D expenditure ÷ Project expenditure)

The Net amount of the recoupment means the total amount of the recoupment, less any repayments of the recoupment during an income year.

Project expenditure is expenditure that the recoupment requires to be / to have been incurred on certain activities. You need to refer to your grant agreement to work out what your project expenditure is in respect of each recoupment received. A recoupment may be an instalment under the agreement.

This cap ensures that, in relation to your R&D activities, you will receive the R&D incentive, rather than the grant, where the R&D tax incentive is worth more than the grant.

If you have received a recoupment that is a reimbursement, no cap applies. This is because logically, your clawback adjustment on the reimbursement cannot exceed 10% of the reimbursement because the recoupment will always equal the expenditure being reimbursed.

See also:

• Clawback adjustment for information about identifying your R&D expenditure.

Examples

The following examples show how you work out the clawback adjustment in different scenarios.

 

 

 

 

 

 

Related entities

When working out your clawback adjustment, you also need to consider whether you have received or are entitled to receive any government recoupments relating to expenditure taken into account in working out the R&D tax incentive tax offset for an:

• R&D entity connected with you
• R&D entity that is an affiliate of yours or an R&D entity you are an affiliate of.

If you have received or are entitled to receive any government recoupment relating to expenditure taken into account in working out the R&D tax offset for one of the related entities specified above, you will also need to take your related entity's expenditure and combine it with your R&D expenditure, before applying the extra income tax rate of 10%.

See also:

• Related entities

A recoupment that is repaid

You may have received a recoupment that may need to be repaid or partially repaid at a later date under the recoupment agreement. For example, the government repayment obligation may align with the success of the project. If the project is considered successful and a certain amount of sales are made in connection with the project, then you may be required to repay part of your recoupment to the government agency. Alternatively, a recoupment may need to be repaid if you have breached certain conditions of the recoupment agreement.

If your grant is repaid to some extent in an income year, you may need to reduce the expenditure required to be incurred, which will reduce the extra income tax in relation to the year the grant was received. You will also need to recalculate your cap, to take into account a repayment by reducing the net amount of the recoupment by the amount of the grant that is repaid.

If your recoupment is a reimbursement, you will need to adjust your calculation of the clawback adjustment to take into account that the recoupment has been reduced and therefore reimburses a lesser amount of the expenditure that you can claim a notional deduction and R&D tax offset in relation to.

If you are required to repay all or part of your recoupment in an income year after the income year that you receive or are entitled to receive your recoupment, you may need to amend your income tax return (if you had previously lodged it with a clawback adjustment). You will need to work out the new clawback adjustment taking into account the repayment of the recoupment and change your clawback adjustment accordingly.

 

See also:

• Section 355-450 of the ITAA 1997

The impact on basic income tax liability

Your clawback adjustment will increase your basic income tax liability on your taxable income beyond the amount worked out by applying the income tax rates to your taxable income.

Clawback and R&D partnerships

There are special rules in Subdivision 355-J of the ITAA 1997 regarding the R&D tax incentive for certain types of partnerships known as R&D partnerships.

If you are a partner of an R&D partnership you may also have to pay your proportion of extra income tax if recoupments are received that relate to expenditure on R&D activities by the R&D partnership and you are entitled to claim the R&D tax incentive for these activities.

Specifically, you are taken to have:

• incurred your proportion of partnership expenditure when the R&D partnership incurred that expenditure (including expenditure to acquire a depreciating asset)
• received your proportion of the recoupment when the R&D partnership received the recoupment.

These deeming rules mean that each R&D entity that is a partner of an R&D partnership can then determine if a clawback adjustment applies, when it applies and work out the amount of the clawback adjustment.

The R&D partnership does not make a clawback adjustment.

See also:

• R&D partnerships

Clawback and consolidation

If you are the head company of a consolidated group or MEC group, your subsidiary members are treated as part of you (the head company) while they are part of the consolidated or MEC group for income tax purposes. Therefore, the R&D tax incentive applies to your consolidated group or MEC group as if it is a single entity.

This is known as the single entity rule and it means that:

• the actions and transactions of a subsidiary member are treated as having been undertaken by you, the head company
• expenditure a subsidiary member incurs on R&D activities is taken to be incurred by you, the head company
• you (and not your subsidiary member) may be entitled to the R&D tax incentive for expenditure on R&D activities undertaken by a subsidiary member while it was in your consolidated or MEC group
• you (and not your subsidiary member) may need to make a clawback adjustment if your subsidiary member has received a government recoupment in relation to notional deductions you take into account when claiming the R&D tax incentive tax offset.

If you are the head company of a consolidated or MEC group and a subsidiary member joins or leaves your consolidated or MEC group, the entry history rule or exit history rule will assist you to calculate your liability for income tax or loss, which could be impacted by a clawback adjustment.

For example, the entry history rule requires that after an entity becomes a subsidiary member of a consolidated or MEC group, everything that happened in relation to it before it became a subsidiary member is taken to have happened in relation to you (the head company) for the purposes of calculating your liability for income tax or loss.

If a company received a government recoupment in the income year before joining your consolidated or MEC group, you are taken to have received that recoupment after the subsidiary member joined the consolidated or MEC group due to the entry history rule. You will then take this recoupment into account when determining if you need to make a clawback adjustment, its timing and amount, which will impact on your income tax liability.

See also:

• Consolidation
• Single entity rule
  • section 701-1 of the ITAA 1997
  • Taxation Ruling TR 2004/11 Income tax: consolidation: the meaning and application of the single entity rule in Part 3-90 of the Income Tax Assessment Act 1997
   
• Section 701-5 of the ITAA 1997 – the entry history rule
• Section 701-40 of the ITAA 1997 – the exit history rule

Transitional rules

The R&D tax incentive applies to assessments for income years commencing on or after 1 July 2011. Before the introduction of the R&D tax incentive, the former R&D tax concession applied.

The R&D tax incentive clawback rules differ from those that were formerly in place for the R&D tax concession. The R&D tax incentive imposes an extra income tax on certain recoupments. This compares to the R&D tax concession clawback under the former section 73C of the ITAA 1936, which reduced what all or part of could be claimed as an R&D deduction under the R&D tax concession from 125% to 100% of the expenditure incurred.

If you claimed the former R&D tax offset instead of an R&D deduction, this would result in a reduction in the former R&D tax offset, as the former R&D tax offset is calculated based on R&D deductions the company could claim if it had not elected the former R&D tax offset.

Under the former section 73C of the ITAA 1936, the reduction in your claim was calculated by working out the initial clawback amount (twice the amount of the grant or recoupment) which was then applied against expenditure on research and development activities (relevant expenditure) until it was completely absorbed.

By applying the initial clawback amount against R&D expenditure, you reduce the claim from 125% to 100% of the expenditure incurred. The initial clawback amount was applied against relevant expenditure in the following order:

• in the year of the grant or recoupment
• in years before the year of the grant or recoupment in reverse chronological order
• in chronological order in years after the year of the grant or recoupment.

You may have received a grant or recoupment that was subject to the former clawback rules in section 73C of the ITAA 1936. It is possible that after you have applied the initial clawback amount against relevant expenditure as outlined above until 30 June 2011, that you may have a remaining initial clawback amount (which has not yet been absorbed) at that point in time. As the new clawback rules apply to income years commencing on or after 1 July 2011, this initial clawback amount is not applied to expenditure incurred in income years starting on or after 1 July 2011, as the new clawback rules generally apply from this point onwards.

If you have received a recoupment that has instalments before and after 1 July 2011, you will need to consider which clawback rules to apply. For recoupments received in the income year ending 30 June 2011 you apply the former R&D tax concession clawback rules. For recoupments (including instalments) you receive in income years starting on or after 1 July 2011 (for example the income year ending 30 June 2012), you apply the R&D tax incentive clawback rules.

However, there is a transitional rule that provides an exception. The effect of the transitional rule is that even though section 73C is repealed, the repeal can be disregarded in certain circumstances.

For example, if you receive a recoupment of expenditure from an Australian government agency on or after 1 July 2011, for expenditure incurred before that date, you will need to reduce your claim for deduction for relevant expenditure (or R&D tax offset if you have elected this instead) using the former clawback rules in section 73C of the ITAA 1936 in earlier income years.

 

See also:

• For information about the former R&D tax concession, including the former clawback rules, refer to Part C-8 of the Guide to the R&D tax concession.

Whether recoupments are assessable income

Recoupments (including grants) you receive for R&D expenditure that you claim the R&D tax incentive for must be included in your total assessable income unless they are specifically exempt under a provision of the ITAA 1936 or ITAA 1997.

See also:

• Section 6-5 of the ITAA 1997
• Section 20-25 of the ITAA 1997
• Taxation Ruling TR 2006/3 Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business

Other requirements

If you are an eligible R&D entity and you want to claim the R&D tax incentive, you should consider the other requirements, including that you:

• must register your R&D activities every year
• can notionally deduct expenditure on R&D activities
• may need to adjust your income tax return if
  • your eligible activities have produced tangible products for supply to someone else, or to be applied to your own use – other than in transforming these products for supply (feedstock adjustment)
  • you are registered for GST
   
• must claim your R&D tax offset by lodging a company tax return and R&D tax incentive schedule at the end of your income year
• must keep adequate records to demonstrate to AusIndustry, Innovation Australia and to us that you carried out the eligible R&D activities and that you did incur eligible R&D expenditure on those activities
• must consider any special transitional rules that apply to situations that extend over income years where the R&D tax concession provisions and the R&D tax incentive provisions apply.

See also

• Registering
• Amounts you can claim
• Adjustments
• Claiming the tax offset
• Keeping records and calculating your notional deductions

More information

For information on registration, eligibility of R&D activities and findings, contact AusIndustry:

• visit the ‘Contact Us’ page on the business.gov.auExternal Link website for details on how to contact AusIndustry via phone (13 28 46), email or web chat.

For information on eligible entities and amounts you can claim, contact the ATO:

• visit ato.gov.au/randdtaxincentive
• phone us on 13 28 66 between 8.00am and 6.00pm Monday to Friday
• email us at innovationtax@ato.gov.au

Guide for research and development (R&D) tax incentive claimants providing information about how the clawback adjustment works for recoupments received.