Part B – Clawback amounts

Last updated 18 September 2022

Instructions for completing Part B – Clawback amounts.

Feedstock adjustments

A feedstock adjustment applies when you obtain an R&D tax incentive offset for your feedstock expenditure incurred on R&D activities, when those activities also produce tangible products for supply to someone else, or to be applied to the R&D entity's own use (other than in transforming such products for supply).

The feedstock adjustment applies to amounts claimed on the following:

the expenditure on goods or materials acquired or produced (feedstock inputs) which are transformed or processed during R&D activities in producing one or more tangible products (feedstock outputs)
the expenditure on energy that is input directly into that transformation or processing.
amounts claimed for the decline in value of assets used in acquiring or producing feedstock inputs.

The feedstock provisions apply to both core R&D activities and supporting R&D activities that transform or process feedstock inputs. The provisions are not confined to industrial or mass production activities.

When a feedstock adjustment is triggered, you must include an amount in your assessable income. A feedstock adjustment is triggered in the income year that the output is supplied or applied to your own use.

You do not need to complete Part B 1, 2, or 3 unless your R&D activities have produced a marketable product supplied to someone else, or applied to your own use during 2021–22 (other than in transforming such a product for supply). If your R&D activities have not produced a marketable product supplied to someone else or applied to your own use, go to Part B – R&D recoupment.

If you have a feedstock adjustment amount in 2021–22 but are not claiming the R&D tax offset:

you do not need to complete the Research and development tax incentive schedule 2022
you will still need to work out the additional assessable income resulting from your feedstock adjustment (and any other clawback amount), and include it in the Company tax return 2022 at
- W item 21 Clawback amounts - additional assessable income, and
- B item 7 Other assessable income.

These instructions provide details about how you work out the additional assessable income arising from your feedstock adjustment.

For more information see Feedstock adjustments.

Item 1 Feedstock revenue total

Show at item 1 Feedstock revenue total the total amount of feedstock revenue from all R&D activities, where those activities have produced products supplied to someone else, or applied to the R&D entity's own use (other than in transforming such products for supply).

Item 2 Expenditure on feedstock inputs attributable to feedstock output

Show at item 2 Expenditure on feedstock inputs attributable to feedstock output the total amount of feedstock inputs attributable to feedstock outputs on all R&D activities, if those activities have produced products supplied to someone else, or applied to the R&D entity's own use (other than in transforming such products for supply).

Include in the total amount you show at item 2:

the total amount of energy input directly into the transformation or processing
the decline in value of assets used in acquiring or producing the inputs to the R&D activities.

If you must include an additional amount in your assessable income as a result of triggering a feedstock adjustment, you may choose to reduce the amount of feedstock input expenditure in item 2 to calculate the additional assessable income for the feedstock adjustment in a particular income year if:

the total R&D notional deductions in the income year in which the relevant R&D expenditure arose exceeds $100 million, and
the sum of the proposed reduction and any prior reductions under these rules for that income year is not greater than the amount by which your R&D expenditure exceeded $100 million (for example, if total R&D expenditure is $150 million, then you may reduce additional liabilities by no more than $50 million).

Item 3 Feedstock adjustment amount

The amount you show at B item 3 Feedstock adjustment amount is the total of all feedstock adjustments that are required to be made for all R&D activities, if those activities have produced products supplied to someone else, or are applied to the R&D entity's own use (other than in transforming such products for supply in the future).

Step 1

Determine which R&D activities have produced marketable products.

Step 2

For each of the marketable products identified at step 1 above, work out the following amounts:

Step 2A – feedstock revenue for the current year
Step 2B – the sum of amounts claimed in the current income year and all earlier income years as notional deductions for
- feedstock inputs attributable to feedstock outputs from each of these R&D activities
- energy input directly into the transformation or processing
- the decline in value of assets used in acquiring or producing the feedstock inputs to these R&D activities.

Where you have total notional R&D deductions that exceed $100 million, the amount used for the purposes of step 2B may be reduced. The amount of the reduction when combined with reductions under the clawback and balancing adjustment rules cannot exceed the excess of notional R&D deductions over $100 million.

Step 3

For each of the marketable products identified at step 1 above, determine whether the amount you worked out at step 2A is less than the amount you worked out at step 2B. The feedstock adjustment amount for each marketable product will be calculated as one third of the lesser amount.

Step 4

For each of the marketable products identified at step 1 above, work out your feedstock adjustment amount as follows:

If the amount worked out at step 2A is less than the amount worked out at step 2B, divide the amount shown at step 2A by 3.
If the amount worked out at step 2B is less than the amount worked out at step 2A, divide the amount shown at step 2B by 3.

Step 5

Add together the amounts calculated at step 4 above. Show the total amount at B item 3 Feedstock adjustment amount and at P item 9 total clawback - additional assessable income.

Include this amount in the Company tax return 2022 at W Clawback amounts – additional assessable income item 21 and B Other assessable income item 7.

R&D recoupment

If you (or an entity connected or affiliated with you):

were eligible for the R&D tax incentive, and
received a government recoupment (such as a government grant or reimbursement) in relation to expenditure that is eligible for an R&D tax incentive offset

you must include an amount in assessable income as a clawback. Clawback does not decrease the grant or offset you received.

An R&D recoupment amount arose in 2021–22 if you either received or were entitled to receive a recoupment from an Australian Government agency, or a state or territory body, and the following applied:

the recoupment (such as a reimbursement) related to expenditure incurred on certain activities, or
the recoupment (such as a grant) required expenditure to either be or have been incurred on certain activities

and

that expenditure was notionally deducted for the R&D tax incentive, or
the decline in value was notional deducted where the expenditure was for a depreciating asset used in those activities.

Complete this item only if, during 2021–22, you received a government recoupment that relates to an amount you have notionally deducted at Part A Calculation of notional R&D deductions in the Research and development tax incentive schedule in 2021–22 or in earlier income years commencing on or after 1 July 2011.

When you are subject to additional income tax as a result of clawback, you may choose to reduce the amount of expenditure in 5 R&D expenditure related to recoupments to calculate the additional income tax for the clawback adjustment in a particular income year if:

the total R&D notional deductions in the income year in which the relevant R&D expenditure arose exceeds $100 million, and
the sum of the proposed reduction and any prior reductions under these rules for that income year is not greater than the amount by which your R&D expenditure exceeded $100 million (for example, if total R&D expenditure is $150 million, then you may reduce additional liabilities by no more than $50 million).

Item 4 Recoupments – entitled to or received

Show at item 4 Recoupment(s) – (entitled to/received) the total amount of recoupment you, or an entity connected or affiliated with you, received or become entitled to receive in 2021–22 (other than under the CRC program), that relates to notional R&D deductions for which you have claimed an R&D tax offset in 2021–22 or in earlier income years commencing on or after 1 July 2011.

Item 5 R&D expenditure related to recoupments

Show at item 5 R&D expenditure related to recoupment(s) the total amount you claim as a notional deduction under the R&D tax incentive that relates to the recoupment you show at item 4 Recoupment(s) – (entitled to/received). This may include amounts claimed as a notional deduction in 2021–22 or in earlier income years commencing on or after 1 July 2011. Do not include R&D expenditure that you have already taken into account to work out another clawback adjustment (extra income tax) for another recoupment.

If you repaid any amount of the reimbursement, reduce the amount of expenditure by the amount of the repayments.

Where you have total notional R&D deductions that exceed $100 million, the amount used for the purposes of item 5 may be reduced. The amount of the reduction when combined with reductions under the feedstock and balancing adjustment rules cannot exceed the excess of notional R&D deductions over $100 million.

Item 6 Project expenditure for which recoupments paid

Show at item 6 Project expenditure for which recoupment(s) paid the total project expenditure for all years of the project for which the recoupment has been paid (including R&D and other amounts). Project expenditure means the amount to which the entire recoupment relates and you will need to consider the terms of the grant agreement to work out what your project expenditure is in respect of each recoupment. A recoupment may be an instalment under the agreement.

Where you have total notional R&D deductions that exceed $100 million the amount used for the purposes of item 6 may be reduced. The amount of the reduction when combined with reductions under the feedstock and balancing adjustment rules cannot exceed the excess of notional R&D deductions over $100 million.

When you notionally deduct further amounts related to this recoupment under the R&D tax incentive in future years, you will be required to amend your Company tax return 2022 in the Calculation statement at M R&D recoupment tax to include a further amount of R&D recoupment tax. Further amendments will be required until either:

there is no more expenditure related to this recoupment, or
the amount of the extra tax recouped in the Calculation statement at M R&D recoupment tax becomes equal to the amount of the government recoupment received.

Item 7 R&D recoupment amount

Show at M item 7 R&D recoupment amount the extra tax required on your recoupment as calculated under Subdivision 355-G of the ITAA 1997.

If you have claimed the R&D tax incentive at item 21 in the Company tax return and you have received a government recoupment (such as a government grant or reimbursement) that relates to expenditure that you have claimed a notional deduction for under the R&D tax incentive, the income tax you are liable to pay on the recoupment will be increased. This is referred to as a clawback adjustment.

The clawback adjustment for each project is capped for grants, so that the extra tax payable cannot exceed the amount of the grant, that on a pro rata basis, you received for that project. As a result, if the sum calculated for M for each project exceeds the amount of the grant received for that project (which relates to the R&D expenditure), the amount to be shown at M for that project will be the amount of the grant.

Assessable balancing adjustments

Item 8 Assessable balancing adjustment amount

This item does not apply to you.

Total clawback

Item 9 Total clawback – additional assessable income

Show at item 9 Total clawback - additional assessable income the additional assessable income resulting from all clawback adjustments. Use only the amount shown at B item 3 Feedstock adjustment amount.

Deductible balancing adjustments

Item 10 Balancing adjustments – catch up deduction