These instructions will help you use and complete the Excel spreadsheet version of the Research and development tax concession schedule 2008 (XLS, 138KB)This link will download a file, which in turn will help you complete the items for expenditure on research and development (R&D) on the Company tax return 2008.
For more information about the R&D tax concession, see the joint AusIndustry - Tax Office publication Guide to the R&D tax concession.
Who must complete the research and development tax concession schedule?
You must complete and lodge the Research and development tax concession schedule 2008 (XLS, 138KB)This link will download a file if you make a claim on your company tax return for expenditure on R&D activities under the R&D tax concession that is, sections 73B to 73Z of the Income Tax Assessment Act 1936 (ITAA 1936).
Who can claim the R&D tax concession?
You may be entitled to claim the concession for your company if it is:
- an eligible company that has registered its research and development activities with Innovation Australia through AusIndustry for the 2007-08 year of income, or
- the head company of a consolidated group where at least one of the subsidiary companies in the group is an eligible company and has registered its research and development activities with Innovation Australia through AusIndustry for the 2007-08 year of income (section 73BAB of the ITAA 1936).
An eligible company is a body corporate incorporated under a law of the Commonwealth or of a State or Territory (subsection 73B(1) of the ITAA 1936).
On whose behalf are the R&D activities conducted?
For income years commencing after 30 June 2007, eligible companies may be able to claim expenditures under the R&D tax concession that are:
- incurred in respect of eligible research and development activities, as defined, that are carried out by or on behalf of the claimant company and not on behalf of any other person (Australian owned R&D), and/or
- incurred in respect of Australian-centred research and development activities, as defined, that are carried out on behalf of a foreign company (foreign owned R&D).
The Definitions list defines 'research and development activities', 'foreign company' and 'Australian-centred research and development activities'.
Generally, an eligible company that incurs expenditure on R&D activities in its capacity as a trustee or nominee, other than in its capacity as the trustee of a public trading trust, cannot claim the concession (subsection 73B(3) of ITAA 1936) for expenditure incurred in its trustee or nominee capacity. This does not apply where the trustee and trust are subsidiary members of a consolidated group.
You can only claim the tax concession for expenditure on research and development activities that are registered with Innovation Australia. Innovation Australia, supported by AusIndustry, determines whether activities are research and development activities and Australian-centred research and development activities.
You must lodge an application for registration of the activities with Innovation Australia within 10 months of the end of your income year.
You must register before you make a claim for the R&D tax concession on the company's tax return, including the choice for the R&D tax offset.
Who administers the R&D tax concession?
The R&D tax concession is jointly administered by AusIndustry, part of the Department of Innovation, Industry, Science and Research (DIISR), and the Tax Office.
For information about how to register for the R&D tax concession and about what R&D activities qualify for the concession:
- visit the AusIndustry website
- phone the AusIndustry hotline on 13 28 46
For information about claiming the R&D tax concession:
- go to our 'Research and development tax concession' homepage
- phone the business tax Infoline on 13 28 66.
Before you complete the research and development tax concession schedule
Before you start to use the Excel spreadsheet version of the Research and development tax concession schedule 2008 (XLS, 138KB)This link will download a file, you will need to make certain calculations and complete certain parts of the company tax return. Read through the points below. Although not exhaustive, they list important information.
Seven items on the Company tax return 2008 relate to the R&D tax concession:
At page 3 item 7 Reconciliation to taxable income or loss
- D Accounting expenditure in item 6 subject to R&D tax concession
- L Australian owned R&D tax concession - not including label M
- J Foreign owned R&D tax concession - not including label K
- M Australian owned R&D - extra incremental 50% deduction
- K Foreign owned R&D - extra incremental 75% deduction
- Y R&D tax offset, if chosen.
At page 6 Calculation statement
- U R&D tax offset.
General
- At item 7 Reconciliation to taxable income or loss on the Company tax return 2008, complete D Accounting expenditure in item 6 subject to R&D tax concession. For information about how to complete this item, see 'Preliminary calculation - Add-back of research and development expenditure'.
- Using parts A and B of these instructions, calculate your aggregate research and development amount to determine whether:
- the company can deduct an amount of research and development expenditure (other than contracted expenditure paid to an RRA) under subsection 73B(14) of the ITAA 1936; that is, an aggregate research and development amount of more than $20,000, and
- the company's expenditure qualifies for the 100% or 125% deduction under subsections 73B(4D), 73B(4E), 73B(15), 73B(23), 73B(24A) and 73BA(3) of the ITAA 1936.
- The Definitions list defines aggregate research and development amount.
- Using Parts A and B of these instructions, calculate your expenditure on foreign owned R&D to determine if you have incurred the required amount for claiming under section 73B(14C) of the ITAA 1936: that is, more than $20,000.
- The Definitions list defines expenditure on foreign owned R&D.
- Calculate how much has been spent in each category that qualifies for a deduction under section 73B of the ITAA 1936.
Consolidated groups
The amounts used in the calculation of the R&D tax concession for consolidated groups must be worked out on a consolidated basis, with all intra-group transactions eliminated. They must not be calculated on an aggregated basis, by simply adding together the expenditure of each company in the group.
Only one research and development tax concession schedule is required for a consolidated group.
Clawback
Section 73C of the ITAA 1936 can operate to claw back the additional 25% concession for expenditure on a project of Australian owned R&D for companies that have received a government grant (other than a CRC program grant) for the same project. If you need to make any clawback calculations, you must make them in accordance with section 73C.
You will need to determine whether the company (or any company required to be grouped with it) received, or was entitled to receive, a grant or recoupment in respect of any amounts claimed under the R&D tax concession.
To find out how the clawback rules operate where a subsidiary leaves or joins a consolidated group, see section 73BAE of ITAA 1936 and section 701-5 of theIncome Tax Assessment Act 1997 (ITAA 1997).
If clawback applies, you may find it useful to read 'Important notes on Part A of the research and development tax concession schedule' and 'PART C Government grants and recoupments other than CRC program grants'.
Note that the receipt of a grant can also directly affect the calculations for the Australian owned R&D - extra incremental 50% deduction and the foreign owned R&D - extra incremental 75% deduction.
Prepayments
Adjust the amount of expenditure incurred in accordance with the prepayment provisions in sections 82KZL to 82KZMF of the ITAA 1936 and subsection 73B(11) of the ITAA 1936.
Intra-group markup
Determine any portion of the expenditure that represents an intra-group markup (subsections 73B(14AA) - (14AD) of the ITAA 1936) that is
- ineligible for the additional 25% component in accordance with the intra-group markup provisions (relevant to expenditure on Australian owned R&D only), and
- excluded from the definition of incremental expenditure for the purposes of Australian owned R&D and foreign owned R&D expenditure.
Overseas expenditure
Companies wishing to claim a deduction under sections 73B, 73BA, 73BH or 73QA of the ITAA 1936, or a tax offset under section 73I of the ITAA 1936, for overseas research and development activities, must have an overseas provisional certificate from Innovation Australia before they can make a claim. Sections 39EC and 39ED of the Industry Research and Development Act 1986 (IR&D Act) cover the application requirements and decisions on applications for overseas provisional certificates.
Depreciating assets/plant
Determine amounts that are available in relation to depreciating assets or plant under sections 73BA and 73BH of the ITAA 1936, in relation to Australian owned research and development activities.
For more information, see the Guide to depreciating assets 2008 (NAT 1996).
Core technology
Determine how much core technology expenditure is deductible in accordance with subsections 73B(12A) to 73B(12B) of the ITAA 1936 in respect of Australian owned R&D.
Extra incremental deductions - Australian owned and foreign owned R&D
Determine whether the company is eligible for the extra 50% deduction for expenditure on Australian owned R&D activities or the extra 75% deduction for expenditure on foreign owned R&D activities by referring to subsections 73QA(1) and 73QB(1) of the ITAA 1936.
Grouping rules
If you are claiming:
- the R&D Tax Offset
- the extra deductions for Australian owned and/or foreign owned R&D
- for expenditure paid to associates (intra-group markup), or
- an associate has received a grant in relation to research and development activities you are claiming (clawback)
you need to determine which entities are in the company group in accordance with sections 73L and 73R of the ITAA 1936.
A head company of a consolidated group will also need to consider these provisions (for example, where it is grouped with other entities with less than 100% control or ownership).
Expenditure that is not at risk
Apply section 73CA of the ITAA 1936 to any expenditure for which the company was not at risk, or section 73CB of the ITAA 1936 to any expenditure incurred to a tax-exempt body that was not at risk (relevant to expenditure on Australian owned R&D only).
Roll-over relief
See sections 73E to 73G of the ITAA 1936 to determine expenditure that may qualify for roll-over relief.
Goods and services tax (GST)
Adjust expenditure amounts to exclude any GST input tax credits to which you are entitled (see Division 27 of the ITAA 1997).