21 Research and development tax incentive

About the R&D tax offset

An eligible company will be entitled to an R&D tax offset if its total notional deductions for an income year are at least $20,000. If your total notional deductions are less than $20,000, you will only be able to obtain the R&D tax offset for:

• expenditure incurred to a Research Service Provider (RSP) for services within a research field for which the RSP is registered under the Industry Research and Development Act 1986 (IR&D Act 1986), where that RSP is not an associate of the R&D entity
• expenditure incurred as a monetary contribution under the Co-operative Research Centre (CRC) program.

If you are claiming an R&D tax offset amount at item 21 – label A Non-refundable R&D tax offset or at item 21 – label U Refundable R&D tax offset, you must complete a Research and development tax incentive schedule 2024 and lodge it with your Company tax return 2024. We have a requirement to publish a company’s R&D claims 2 years after the end of financial year. We use information in the R&D schedule to meet our obligation to publish R&D expenditure companies claim. This will include publishing your company name, ABN or ACN and claim for notional deductions. See About the R&D program.

Non-refundable R&D tax offset

Complete in this section, labels A, B, C and D.

A – Non-refundable R&D tax offset

Write at item 21 – label A the amount of non-refundable R&D tax offset. This is the amount calculated in the Research and development tax incentive schedule 2024 at Part E, item 3 – label A Non-refundable R&D tax offset.

This amount plus the amount included in item 21 – label B Non-refundable R&D tax offset carried forward from previous year are included in your total in the Calculation statement at label D Non-refundable carry forward tax offsets.

B – Non-refundable R&D tax offset carried forward from previous year

Write at item 21 – label B the amount of non-refundable R&D tax offset carried forward from the previous year. If you claimed a non-refundable R&D tax offset in one or more earlier income years commencing on or after 1 July 2011 and did not apply all or part of the tax offset in those earlier income years, you may be able to carry forward and use those parts of the tax offset that was unapplied in this income year. To work out whether you can carry forward and use all or part of the non-refundable R&D tax offset from an earlier income year to this year, see Division 65 of the ITAA 1997.

You can obtain the amount to include at label B from your previous year’s company tax return at item 21 – label D Non-refundable R&D tax offset carried forward to next year.

However, don't include an amount at label B if you are prevented from using the non-refundable R&D tax offset from 2011–12 by Division 65 of the ITAA 1997. For example:

• Division 65 states that before you can apply a tax offset brought forward from a prior year to reduce the amount of income tax that you will pay in a later year, you must apply it to reduce certain amounts of net exempt income. If the company is a base rate entity for the income year, net exempt income is reduced by $1 for each 25 cents of the tax offset; otherwise net exempt income is reduced by $1 for each 30 cents of the tax offset.
• Division 65 states that you can't apply a tax offset brought forward from a prior year if Subdivision 165-A of the ITAA 1997 (as applied to a carry forward tax offset) prevents you from doing so. You can't use a carry forward tax offset if you are unable to meet either the continuity of ownership test or the business continuity test in Division 165-A of the ITAA 1997.

If you have not previously claimed this non-refundable R&D tax offset, or you did not have any non-refundable R&D tax offset carried forward from one or more earlier income years commencing on or after 1 July 2011 you don't need to complete B item 21.

The amount you have included at label B plus the amount included in item 21 – label A Non-refundable R&D tax offset are included in your total in the Calculation statement at label D Non-refundable carry forward tax offsets.

Prior to completing item 21 – labels C and D you will need to complete the Calculation statement to work out your income, tax payable (and other offset amounts) before you will know how much can be applied.

C – Non-refundable R&D tax offset to be utilised in current year

Write at item 21 – label C the amount of non-refundable R&D tax offset utilised in the current year. The non-refundable R&D tax offset can be utilised to reduce your tax payable to zero, but can't go below zero, that is, not into a negative.

To work out the non-refundable R&D tax offset you can use this year, you will need to consider amounts you have included in item 21, labels A and B:

• A Non-refundable R&D tax offset
• B Non-refundable R&D tax offset carried forward from previous year.

If the amount in the Calculation statement at label T2 Subtotal 1 is more than the amount in the Calculation statement at label D Non-refundable carry forward tax offsets, the amount at item 21 – label C will be equal to the amount at item 21 – label A plus item 21 – label B (see Example 15a).

If the amount in the Calculation statement at T2 Subtotal 1 is less than the amount at D Non-refundable carry forward tax offsets, you will need to calculate an amount at C. Show at C the amount of non-refundable R&D tax offset utilised to make T3 Subtotal 2 in the Calculation statement zero (see Example 15b).

D – Non-refundable R&D tax offset carried forward to next year

Write at item 21 – label D the amount of non-refundable R&D tax offset carried forward to next year. This amount is calculated by adding the amounts at item 21 – labels A and B and then subtracting the amount at item 21 – label C.

You must complete item 21 – label C and the Calculation statement prior to completing item 21 – label D.

Refundable R&D tax offset

Complete in this section, label U.

U – Refundable R&D tax offset

Write at item 21 – label U the amount of refundable R&D tax offset. This amount is calculated in Part E, item 2 – label U Refundable R&D tax offset of the Research and development tax incentive schedule 2024.

Include this amount in the Calculation statement as your total at label E Refundable tax offsets.

Adjustments

Complete in this section, labels W and X.

W – Clawback amounts – additional assessable income

If you have completed the Research and development tax incentive schedule 2024, include at item 21 – label W the amount calculated in Part B, item 9 – label P Total clawback – additional assessable income. Also include this amount at item 7 – label B of the Company tax return 2024.

If you have additional assessable income in relation to a clawback amount, but are not claiming a tax offset under the R&D tax incentive in this year of income:

• you don't need to complete the Research and development tax incentive schedule 2024
• you will still need to work out this amount and include it at item 21 – label W and at item 7– label B in the Company tax return 2024.
  See Part B of the Research and development tax incentive schedule instructions 2024 for information about how you work out your clawback amount.

X – Balancing adjustments – catch up deduction

If you have completed the Research and development tax incentive schedule 2024, include at label X the amount calculated in Part B, item 10 – label Q Balancing Adjustments – catch up deduction. Also include this amount at item 7 - label X of the Company tax return 2024.

If you have a deductible balancing adjustment amount but are not claiming a tax offset under the R&D tax incentive in this year of income:

• you don't need to complete the Research and development incentive schedule 2024
• you will still need to work out the catch up deduction for the deductible balancing adjustment and include it at X item 21 Balancing adjustments – catch up deduction and at X item 7 Other deductible expenses in the Company tax return 2024 (see Part B of the Research and development tax incentive schedule 2024 instructions for information to work out your deductible balancing adjustment).

Continue to: 22 Early stage venture capital limited partnership tax offset

Return to: Instructions to complete the Company tax return 2024