Completing the Research and development tax incentive schedule

Instructions for completing the Research and development tax incentive schedule.

Preparing the R&D tax incentive schedule

These instructions will help you to prepare the R&D tax incentive schedule, alternatively you can prepare the schedule using the Research and development tax incentive calculator. Lodge this schedule with an original tax return or an amendment request.

Before you start to fill in the schedule, you will need to make certain calculations and complete certain parts of the Company tax return 2023:

• item 6 – label Q Total expenses
• item 7 – label D Accounting expenditure in item 6 subject to R&D tax incentive

Total notional R&D deduction amount

Using Part A, calculate your total notional R&D deduction amount to determine whether you can claim an R&D tax offset. To be eligible to claim an R&D tax offset, your total notional deductions at Part A must be 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), when that RSP isn't an associate of the R&D entity
• expenditure incurred as a monetary contribution under the Cooperative Research Centre (CRC) program.

Complete a schedule only if any of the following applies:

• your total notional deductions are at least $20,000
• you have incurred expenditure to an RSP
• you have made a monetary contribution under the CRC program.

If you only have to report clawback amounts covered by Part B of this schedule:

• you do not complete this schedule
• you record the clawback amounts in the Company tax return 2023.

Expenditure to associates

Under the R&D tax incentive, you can only obtain an R&D tax offset for expenditure incurred to an associate when that amount is paid. Before completing the Research and development tax incentive schedule 2023, you need to determine which amounts you have paid to associates.

For more information, see Part C – R&D expenditure to associates.

Consolidated groups

The amounts used in the calculation of the R&D tax incentive 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 incentive schedule 2023 is required for a consolidated group, to be completed by the head company.

Clawback amounts

You have a clawback amount if you claimed a notional deduction under the R&D tax incentive and:

• you have a feedstock adjustment, or
• you received, or have become entitled to receive, an R&D recoupment for expenditure for which you claim the R&D tax offset, or
• you have an assessable balancing adjustment for an asset used in conducting R&D activities.

Under subdivision 355-G of the ITAA 1997, if you have a clawback amount, you must work out the amount of additional assessable income that you show in the Company tax return 2023 at:

• item 21 Clawback amounts – additional assessable income – label W and
• item 7 Other assessable income – label B.

Deductible balancing adjustments

You have a catch-up deduction if you have a deductible balancing adjustment for an asset used in conducting R&D activities.

Under subdivision 355-H of the ITAA 1997, if you have a deductible balancing adjustment for an R&D asset, you must work out the amount you can claim as an additional catch up deduction that you show in the Company tax return 2023 at

• item 21 Balancing adjustments – catch up deduction – label X and
• item 7 Other deductible expenses – label X.

For more information, see Part B – Balancing adjustments – catch up deduction.

Prepayments

Adjust the amount of expenditure incurred in accordance with the prepayment provisions in sections 82KZL to 82KZMF of the Income Tax Assessment Act 1936 (ITAA 1936).

For more information, see Deductions for prepaid expenses 2023.

Expenditure incurred while not at arm's length

If you incur expenditure to either an associate or another party with which you are not dealing at arm's length and the expenditure incurred exceeds the market value of the relevant R&D activity, the amount eligible for a notional R&D deduction is the market value of the R&D activity.

Intra-group mark-ups

The amount that you can claim as a notional R&D deduction is reduced to reflect mark-ups between connected or affiliated entities.

Before completing the schedule you need to calculate your reduction amount using the method statement in subsection 355-415(2) of the ITAA 1997.

Overseas expenditure

You must have a positive overseas finding from AusIndustry before you can claim a notional deduction for expenditure on overseas R&D activities under Division 355 of the ITAA 1997. Sections 28C and 28D of the Industry Research and Development Act 1986 (IR&D Act) provide information on findings about activities to be conducted outside Australia, including conditions that must be met. You cannot claim for expenditure on overseas activities if the R&D is conducted for a foreign corporation that is connected or affiliated with you.

For more information about the location of your R&D activities, see business.gov.auExternal Link

Depreciating assets

Determine amounts that are notionally deductible for decline in value of depreciating assets under subdivision 355-E or section 355-520 of the ITAA 1997, in relation to your R&D activities.

For more information, see Guide to depreciating assets 2023.

Entitlement requirements

To work out whether you qualify for the refundable or non-refundable tax offset, you need to consider whether you either:

• meet the aggregated turnover threshold, or
• are controlled by one or more exempt entities.

‘Aggregated turnover’ is explained in Definitions.

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 only eligible for the non-refundable tax offset.

For more information, see Calculate your aggregated turnover

Expenditure that is not at risk

As per section 355-405 of the ITAA 1997, a company cannot claim a notional deduction for expenditure that is not ‘at risk’. Apply section 355-405 of the ITAA 1997 to reduce your notional deductions by any amount for which you, the company, were not at risk.

TR 2021/5 Income tax: research and development tax offsets – the ‘at risk’ rule considers the tests for determining whether a company’s expenditure is at risk.

Core technology expenditure

Expenditure incurred in acquiring technology that is core technology cannot be claimed under the R&D tax incentive.

If you are unsure as to whether your particular technology is core technology, you can request a finding from AusIndustry. This finding gives you certainty about whether expenditure incurred in acquiring the technology is excluded under the R&D tax incentive.

Building expenditure

Expenditure cannot be claimed under the R&D tax incentive if it is incurred to acquire or construct either:

• a building or a part of a building
• an extension, alteration or improvement to a building.

Interest expenditure

Expenditure incurred for interest (within the meaning of subsection 128A(1AB) of the ITAA 1936) payable to an entity cannot be claimed under the R&D tax incentive.

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).

Lodging the schedule

For information on how to lodge your schedule, see Lodgment.

Complete all items that apply to you, including yes or no items. If an item (other than a yes or no item) does not apply, leave it blank unless otherwise instructed.

Continue to: Completing company information and preliminary calculation