The R&D tax incentive provides a targeted tax offset to encourage certain companies (R&D entities) to conduct R&D activities that benefit Australia and has the following core components:
- a 43.5% refundable tax offset for eligible entities with an aggregated turnover of less than $20 million, unless they are controlled by one or more tax exempt entities
- a 38.5% non-refundable tax offset for all other eligible entities.
If an entity’s notional R&D deductions exceed $100 million for an income year, the rate of the R&D tax offset is reduced to the company tax rate for that portion exceeding $100 million. This change applies to assessments for income years starting on or after 1 July 2014 and before 1 July 2024.
Part E of these instructions will assist you in working out which offset you are entitled to and the amount of R&D tax offset you will be able to claim at item 21 of the Company tax return 2021.
See also:
- Refundable and non-refundable tax offsets
- Grouping for aggregated turnover purposes
- Eligibility
- Research and development tax incentive
Item 1 Exempt entity ownership
Regardless of a company's aggregated turnover, if one or more exempt entities have direct control or indirect control of the company (with a relevant control threshold of 50%), then the company is eligible for the 38.5% non-refundable tax offset only.
If your company is controlled by one or more income tax-exempt entities, place an X in the box at the right of Yes and go to Part E item 5 Non-refundable tax offset. You do not need to complete items 2, 3 and 4.
If your company is not controlled by one or more income tax exempt entities, place an X in the box at the right of No and go to item 2.
Item 2 Aggregated turnover
If your aggregated turnover is $20 million or greater, you are eligible for the 38.5% non-refundable tax offset.
If your company has an aggregated turnover of $20 million or greater, place an X in the box at the right of Yes and go to Part E item 5 Non-refundable tax offset. You do not need to complete items 3 and 4.
If you have an aggregated turnover of less than $20 million, place an X in the box at the right of No. You must complete items 3 and 4 of Part E. You do not need to complete item 5.
Item 3 Aggregated turnover less than $20 million
At Part E item 2, if you have placed an X in the box at the right of No, you must complete item 3 and show details for your company and all entities connected with you, or that are your affiliates, during 2020–21.
Enter your company name and tax file number (at a item 3), and (if any) the names and tax file numbers of all entities that are connected with you, or are your affiliates, at any time during the year in Part E item 3.
Attach an additional table if you are connected or affiliated with more than three other entities.
In the column Annual turnover, enter the amount of each entity's annual turnover, as defined in section 328-120 of the ITAA 1997.
If you have used an additional table, add up the annual turnovers for each of the entities listed on the additional table and include the sum of these amounts at row e.
To correctly calculate aggregated turnover, you will need to make an adjustment if any amounts shown in the Annual turnover column relate to:
- ordinary income amounts derived from dealings between yourself and any entities you have listed in item 3
- ordinary income amounts derived from dealings between two or more other entities you have listed in item 3
- ordinary income amounts derived by entities you have listed in item 3 while they were not connected with you and were not your affiliates.
At row f, enter the total amount included in the Annual turnover column which requires an adjustment due to the points described above.
Calculate the amount to be shown at AT Aggregated turnover using Worksheet 2 below. If you complete the form on your computer, this will be calculated for you.
Row |
Calculation element |
Amount |
|---|---|---|
a |
Your company turnover |
$ |
b |
Connected/affiliated entity turnover |
$ |
c |
Connected/affiliated entity turnover |
$ |
d |
Connected/affiliated entity turnover |
$ |
e |
Connected/affiliated entity turnover total from additional table |
$ |
f |
Adjustments required as a result of exclusions from aggregated turnover |
$ |
AT |
Aggregated turnover (a + b + c + d + e − f) |
$ |
Item 4 Refundable tax offset
If you answered no to items 1 and 2 of Part E and your notional deductions calculated under Part A label Z total $20,000 or more, you can claim the refundable tax offset. If your notional deductions calculated under Part A label Z total less than $20,000, then you are only entitled to a tax offset for notional deductions in relation to expenditure under Part A, A and B, R&D expenditure – Research service provider (RSP) and Part A, Q and R, Cooperative Research Centre (CRC) contributions.
Enter at Z1 Total notional R&D deductions the amount shown at Z of Part A, item 11. Enter at U Refundable R&D tax offset the amount calculated by multiplying the amount shown at Z1 Total notional R&D deductions by 43.5%.
However, if Z1 is greater than $100 million you will need to calculate the amount at U Refundable R&D tax offset as:
- 43.5% multiplied by $100 million, plus
- the corporate tax rate multiplied by the portion of the amount shown at Z1 Total notional R&D deductions which exceeds $100 million.
For example, if an entity was entitled to a refundable 43.5% R&D tax offset and had $150 million of R&D notional deductions, it would be entitled to an offset calculated as follows:
$100 million ×43.5% = $43,500,000
$50 million × 30% = $15,000,000
Total offset = $58,500,000
If you complete the form on your computer, this will be calculated for you.
Transfer the amount at U to the Company tax return 2021, U Refundable R&D tax offset item 21.
You do not need to complete item 5.
Item 5 Non-refundable tax offset
If you answered yes to item 1 or item 2 of Part E and your notional deductions calculated under Part A label Z total $20,000 or more, you can claim the non-refundable tax offset.
If your notional deductions calculated under Part A label Z total less than $20,000, then you are only entitled to a tax offset for notional deductions for expenditure under Part A, A and B, R&D expenditure – Research service provider (RSP) and Part A, Q and R, Cooperative Research Centre (CRC) contributions.
Enter at Z2 Total notional R&D deductions the amount shown at Z of Part A, item 11. Enter at A Non-refundable R&D tax offset the amount calculated by multiplying the amount you have shown at Z2 Total notional R&D deductions by 38.5%.
However, if Z2 is greater than $100 million you will need to calculate the amount at A Non-refundable R&D tax offset as:
- 38.5% multiplied by $100 million, plus
- the corporate tax rate multiplied by the portion of the amount shown at Z2 Total notional R&D deductions which exceeds $100 million.
For example, if an entity was entitled to a non-refundable 38.5% R&D tax offset and had $150 million of R&D notional deductions, it would be entitled to an offset calculated as follows:
$100 million × 38.5% = $38,500,000
$50 million × 30% = $15,000,000
Total offset = $53,500,000
If you complete the form on your computer, this will be calculated for you.
Transfer the amount at A to the Company tax return 2021, A Non-refundable R&D tax offset item 21.
Taxpayer's declaration
If you do not lodge the schedule with your tax return, you must sign and date page 4 of the schedule.