Part B – Clawback amounts

Instructions for completing Part B – Clawback amounts.

Clawback amounts

You show clawback amounts as additional assessable income to clawback the incentive component of the offset previously claimed.

The following may require clawback adjustments:

• feedstock adjustments
• R&D recoupments
• assessable balancing adjustments.

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:

• 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)
• 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 the output is supplied or applied to your own use.

You do not need to complete Part B items 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 2022–23 (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 R&D recoupment.

If you have a feedstock adjustment amount in 2022–23 but are not claiming the R&D tax offset:

• you do not need to complete the Research and development tax incentive schedule 2023
• 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 2023 at both      
  • item 21 Clawback amounts – additional assessable income – label W
  • item 7 Other assessable income –label B.
   

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

For more information, see Clawback of 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.

Item 3 Feedstock adjustment amount

The amount you show at item 3 Feedstock adjustment amount – label B 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 2022-23 income year
• Step 2B – the sum of amounts claimed in the 2022-23 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.
   

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 calculated at step 2B. The feedstock adjustment amount for each marketable product will be the lesser of the amounts at steps 2A and 2B.

Step 4

Add together the amounts calculated at step 3 above. Show the total amount at item 3 Feedstock adjustment amount – label B.

If you do not have any R&D recoupments or Assessable balancing adjustments, see Total clawback. Otherwise, continue on to R&D recoupment and Assessable balancing adjustments.

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 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 2022–23 if you, or a connected or affiliated entity, 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 related to expenditure incurred on certain activities, or
• the recoupment 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 notionally deducted where the expenditure was for a depreciating asset used in those activities.

Complete this item only if, during 2022–23, you, or a connected or affiliated entity, 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 2023 or in earlier income years commencing on or after 1 July 2011.

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 became entitled to receive in 2022–23 (other than under the CRC program), that relates to notional R&D deductions for which you have claimed an R&D tax offset in 2022–23 or in earlier income years commencing on or after 1 July 2011. Include only that part of the total amount under a recoupment agreement that was received or became entitled to be received in 2022-23.

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 2022–23 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 the R&D recoupment amount for another recoupment.

If you receive or are entitled to receive a recoupment, section 355-405 may apply – to prevent notional deductions from being claimed for R&D expenditure or earlier year associated R&D expenditure that is not at risk. If you cannot claim an R&D tax offset for any expenditure related to the recoupment because of section 355-405, that expenditure is not R&D expenditure related to recoupments.

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, required by the recoupment you show at item 4 Recoupment(s) – (entitled to/received). Project expenditure means the total amount of R&D and other expenditure to which this recoupment relates. This recoupment may be an instalment under the agreement. You will need to consider the terms of the grant or other agreement to work out what the project expenditure is in respect of each recoupment.

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 2023 to include a further amount as additional assessable income. Further amendments will be required until there is no more expenditure related to this recoupment.

Item 7 R&D recoupment amount

Show at item 7 R&D recoupment amount – label M the total of all R&D recoupment amounts that relate to expenditure for which you have claimed a notional deduction under the R&D tax incentive.

Step 1

Identify all recoupments shown at item 4 Recoupment(s) – (entitled to/received) that you, or an entity connected or affiliated with you, received, or were entitled to receive in 2022–23.

Step 2

For each recoupment, identify any repayments you have made at any time, to calculate the net amount of each recoupment.

Step 3

• Step 3A – if a recoupment is of expenditure incurred, the recoupment amount is the expenditure recouped that is claimed as a notional deduction under the R&D tax incentive. This is the amount included at item 5 R&D expenditure related to recoupment(s) reduced by any repayments of the recoupment.
• Step 3B – if a recoupment relates to a project for which you received or are entitled to receive a grant, the terms of which require you to incur or have incurred expenditure, the recoupment amount cannot exceed:

Net amount of the recoupment × (R&D expenditure ÷ project expenditure).

The R&D expenditure is the total amount claimed as notional R&D deductions in relation to the recoupment in 2022–23 and prior income years. This is the amount included at item 5 R&D expenditure related to recoupment(s).

The project expenditure is the total expenditure that is required to be incurred on the project under the terms of the grant, including expenditure that will be incurred in future years. This is the amount included at item 6 Project expenditure for which recoupment(s) paid.

If you received a recoupment in 2022–23 for which project expenditure will be incurred and claimed as a notional deduction in a future year, you will need to, at that future time, amend your Company tax return 2023 to include a further clawback amount as additional assessable income. Further amendments will be required to the Company tax return 2023 for each future year that project expenditure is incurred and claimed as a notional deduction, until there is no more expenditure related to the recoupment.

If you incurred and have claimed an R&D tax incentive offset for project expenditure in 2022–23 for a recoupment received in a prior income year, you will have to amend that prior income year to include a clawback adjustment amount.

Step 4

Add up all of the recoupment amounts worked out under steps 1 to 3. Show the total amount at item 7 R&D recoupment amount – label M.

If you do not have any assessable balancing adjustments, go to Total clawback. Otherwise, continue on to Assessable balancing adjustments.

Assessable balancing adjustments

Item 8 Assessable balancing adjustment amount

You must complete item 8 Assessable balancing adjustment amount – label O if:

• a balancing adjustment event happens to a tangible depreciating asset used in R&D activities which decline in value deductions were claimed as notional R&D deductions (for example, a disposal of that asset), and
• the termination value of the asset at that time (usually the disposal consideration) was greater than the asset's adjustable value (usually its written down value). If this is not the case, you will need to consider if you have a deductible balancing adjustment.

Balancing adjustment events occur when the R&D entity stops holding a depreciating asset, for example when the entity sells the asset for which the termination value will, in most cases be the sale proceeds received by the R&D entity.

Step 1

For each asset used for R&D activities where you need to make an assessable balancing adjustment, work out the difference between:

• the asset’s termination value
• the asset’s adjustable value (that is, the asset’s then written-down tax value).

The maximum amount for each asset is the difference between the asset's cost and its adjustable value. This difference will usually be the total decline in value for that asset.

Step 2

• Step 2A – for assets that were wholly used for R&D activities, the amount is the amount calculated in step 1 for the asset.
• Step 2B – for assets that were partially used for R&D activities, the amount is calculated as:

(total R&D deductions ÷ total decline in value) × the step 1 amount for the asset

The total R&D deductions are the total deductions for decline in value claimed as notional R&D deductions in all income years for the asset. The total decline in value is the cost of the asset less its adjustable value.

• Step 2C – for assets used in an R&D partnership and used only for R&D activities, the amount is your partnership proportion of the amount calculated under step 2A for the asset.
• Step 2D – for assets partially used for R&D activities in an R&D partnership, the amount is your partnership proportion of the amount worked out in step 2B.

Step 3

Add the total of the amounts calculated in step 2 for each asset and show this amount at item 8 Assessable balancing adjustment amount – label O.

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. To work it out, use the amounts shown at item 3 Feedstock adjustment amount – label B, item 7 R&D recoupment amount – label M and item 8 Assessable balancing adjustment amount – label O. Work out the amounts apportioned to each offset year for each clawback and add them together.

Step 1 Apportion feedstock adjustment amount to relevant years

For each feedstock adjustment amount worked out at step 3 of item 3 Feedstock adjustment amount, apportion the amount across each year that feedstock expenditure in relation to the feedstock adjustment was incurred:

• If, in step 2, the amount at step 2B is less than the amount at step 2A, the apportionment for each year is the 2B amount included in notional R&D deductions for each year.
• If, in step 2, the amount at step 2A is less than the amount at step 2B, you apportion the feedstock revenue across all years in which the R&D notional deductions were claimed in respect of the feedstock, in proportion to those deductions.
• Add up all the feedstock amounts you worked out above for each year.

Step 2 Apportion R&D recoupment amount to relevant years

For each recoupment amount worked out at step 3 of item 7 R&D recoupment amount:

• Step 2A – if a recoupment amount was a recoupment of expenditure incurred (such as a reimbursement), apportion the recoupment amount across each year, by identifying the expenditure claimed as notional R&D deductions in each year that related to the recoupment.
• Step 2B – if a recoupment requires expenditure to be incurred (such as a grant), apportion the recoupment amount across each year: identify the project expenditure claimed as notional R&D deductions in relation to the recoupment in each year, then apply the following formula to those amounts:

net amount of the recoupment × (R&D expenditure ÷ project expenditure)

The R&D expenditure is the amount claimed as notional R&D expenditure on the project in the relevant year. The project expenditure is the total expenditure that is required to be incurred on the project under the terms of the grant, including expenditure that will be incurred in future years. The result for each year is the recoupment amount attributable to that year.

• Add up all the recoupment amounts worked out above for each year.

Step 3 Apportion the assessable balancing adjustment amount to relevant years

For each asset for which there was a balancing adjustment event resulting in an assessable balancing adjustment amount included at step 3 of item 8 Assessable balancing adjustment amount – label O, apportion the amount worked out at step 2 of item 8 Assessable balancing adjustment amount – label O across all the years for which decline in value deductions were included in notional R&D deductions.

That is, for each asset for each year work out the assessable balancing adjustment amount × (decline in value claimed as a notional R&D deduction in that year ÷ total R&D decline in value).

The total R&D decline in value is the total decline in value claimed as a notional deduction across all the years for which a notional deduction was claimed.

The result for each year is the assessable balancing adjustment amount to be included in the clawback adjustment amount attributable to that year.

Step 4 Add up clawback amounts for each year

For each year that you worked out a clawback amount under any of steps 1, 2 or 3 above (feedstock adjustments, recoupments, or assessable balancing adjustments), add up all the amounts attributable to each year. These are the total clawback adjustment amounts for each year.

Step 5 Work out the deduction amount

Work out the deduction amount for each year. This is the total clawback adjustment amount for the year (as worked out at step 4), multiplied by your corporate tax rate for that year.

Step 6 Work out the offset differential

Work out the offset differential for each year. This is the difference between your original R&D offset entitlement, and what your R&D offset entitlement would have been if the notional R&D expenses had been reduced by the clawback adjustment amount.

• Step 6A – if you are eligible for the refundable R&D offset, multiply the total clawback adjustment amount for each year (worked out at step 4) by your R&D tax offset rate for the notional R&D deductions in the respective year that make up your clawback adjustment. The result is your offset difference for each year.
• Step 6B – if you are eligible for the non-refundable R&D offset:      
  • For each year prior to 2022–23 multiply the total clawback adjustment amount for each year (worked out at step 4) by your R&D tax offset rate for the notional R&D deductions in the respective year that make up your clawback adjustment. The result is your offset differential for each year.
  • For 2022–23      
    • Work out the starting offset – this is your R&D tax offset entitlement based on the notional R&D deductions claimed, disregarding any clawbacks or catch up balancing adjustments.
    • Work out the adjusted offset – this is the R&D tax offset you would have been entitled to if you had reduced your notional R&D expenses claimed by the total clawback adjustment amount (as worked out at step 4), disregarding any deductible balancing charge adjustments.
    • The offset differential is the starting offset minus the adjusted offset.
     
   

Step 7 Work out the amount included in assessable income

Work out the amount you include in your assessable income with this formula:

(Offset differential – deduction amount) ÷ your corporate tax rate for 2022–23

• Step 7A – add up all the offset differentials for each year as calculated in step 6, and from this total subtract the sum of all the deduction amounts for each year as worked out at step 5. By subtracting the deduction amount, the clawback only applies to the incentive component of the R&D tax offset.
• Step 7B – divide the amount calculated in step 7A by your 2022–23 corporate tax rate. Include this amount at item 9 Total clawback – additional assessable income – label P.
• Transfer this amount to your Company tax return 2023 at item 21 Clawback amounts – additional assessable income – label W. You also include it in the Company tax return 2023 at item 7 Other assessable income – label B.

For more information, see Clawback of feedstock adjustments.

Deductible balancing adjustments

Item 10 Balancing adjustments – catch up deduction

You must complete item 10 Balancing adjustments – catch up deduction – label Q if both:

• a balancing adjustment event happens to a tangible depreciating asset, used in R&D activities, for which decline-in-value deductions (that is, depreciation deductions) were claimed as notional R&D deductions
• the termination value of the asset at that time was less than the asset's adjustable value.

Step 1

For each tangible asset used for R&D activities where you need to make a deductible balancing adjustment, work out the difference between the termination value and the adjustable value of each tangible asset used in R&D activities.

Step 2

• Step 2A – for assets that were wholly used for R&D activities, the amount is the amount you worked out in step 1 for the asset.
• Step 2B – for assets that were partially used for R&D activities, you work out the amount as:

(total R&D deductions ÷ total decline in value) × step 1 amount

The total R&D deductions are the total deductions for decline in value of the asset that were claimed as notional R&D deductions in all years. The total decline in value is the cost of the asset less its adjustable value.

• Step 2C – for assets used in an R&D partnership and used only for R&D activities, the amount is your partnership proportion of the amount calculated under step 2A for the asset.
• Step 2D – for assets partially used for R&D activities in an R&D partnership, the amount is your partnership proportion of the amount worked out in step 2B.

Step 3

For each balancing adjustment event resulting in a deductible balancing adjustment amount, apportion the sum of the amount worked out in step 2 across all the years that decline in value deductions were claimed as notional R&D deductions. For each year work out the following:

deductible balancing adjustment amount × (decline in value claimed as a notional R&D deduction in that year ÷ total R&D decline)

The total R&D decline in value is the total decline in value claimed as a notional deduction across all the years for which a notional deduction was claimed.

The result for each year is the deductible balancing amount attributable to that year.

Step 4

For each asset and each year that has a deductible balancing adjustment amount as worked out under step 3, add up all the amounts attributable to each year. These are the total deductible balancing adjustment amounts for each year.

Step 5

Work out the deduction amount for each year. This is the total deductible balancing adjustment amount for the year (as worked out at step 4), multiplied by your corporate tax rate for that year.

Step 6

Work out the offset differential for each year. This is the difference between your original R&D offset entitlement, and what your R&D offset entitlement would have been if the notional R&D expenses had been increased by the deductible balancing adjustment catch up deduction:

• Step 6A – if you are eligible for the refundable R&D offset, multiply      
  • the total deductible balancing adjustment amount for each year (worked out at step 4) by
  • the R&D tax offset rate received for notional R&D deductions in the respective year.
   

The result is your offset differential for each year.

• Step 6B – if you are eligible for the non-refundable R&D offset      
  • For each year prior to 2022–23, multiply the total deductible balancing adjustment amount for each year (worked out at step 4) by the R&D tax offset rate received for notional R&D deductions in the respective year (the result is your offset differential for each year).
  • For 2022–23 work out the following      
    • Work out the starting offset - if you had no clawback adjustments, the starting offset is your R&D tax offset entitlement based on the notional R&D deductions you claim. If you had a clawback adjustment, the starting offset is the adjusted offset calculated at step 6 of item 9 Total clawback – additional assessable income – label P.
    • Work out the adjusted offset – this is the R&D offset you would have been entitled to if the amount you claimed as notional R&D expenses and total expenses were increased by the total deductible balancing adjustment amount attributable to 2022–23 (as worked out at step 4).
    • Work out the offset differential – that is, the adjusted offset minus the starting offset.
     
   

Step 7

Work out the amount to be claimed as a catch up deduction for 2022–23 using the following formula:

(offset differential – deduction amount) ÷ your corporate tax rate for 2022–23

• Step 7A – add up all the offset differentials for each year as calculated in step 6, and subtract the sum of all the deduction amounts for each year as worked out at step 5.
• Step 7B – divide the amount worked in step 7A by your corporate tax rate in 2022–23 – show this amount at item 10 Balancing adjustments – catch up deduction – label Q.
• Transfer this amount to the Company tax return 2023 at item 21 Deductible balancing adjustments – label X. Include this amount in the Company tax return 2023 at item 7 Other deductible expenses – label X.

Continue to: Part C – R&D expenditure to associates