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Part E – R&D tax offset calculation

Last updated 9 August 2023

Instructions for completing Part E – R&D tax offset calculation.

R&D tax incentive core components

The R&D tax incentive has the following core components:

  • For eligible entities with an aggregated turnover of less than $20 million, a refundable tax offset, unless they are controlled by one or more tax exempt entities. The offset is equal to your corporate tax rate plus an additional premium rate of 18.5%.
  • For all other eligible entities, a non-refundable tax offset. The offset is equal to your corporate tax rate plus a premium rate based on the level of incremental R&D intensity (the R&D expenditure as a proportion of total expenses).
  • If your notional R&D deductions exceed $150 million for an income year, the rate of the R&D tax offset is reduced to the company tax rate for the portion over $150 million.

Part E helps you work out:

  • which offset you are entitled to
  • the amount of R&D tax offset you claim at item 21 Research and development tax incentive in the Company tax return 2023.

For more information, see Refundable and non-refundable tax offsets

Item 1 Additional information

Show your corporate tax rate at item 1 Tax rate – label R. This will be either:

Item 2 Refundable R&D tax offset

If you answered No to Part D items 1 and 2 and your notional deductions calculated under Part A item 11 – label Z total $20,000 or more, you can claim the refundable R&D tax offset.

If your notional deductions calculated under Part A item 11 – 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 items 1A and 1B R&D expenditure – Research service provider (RSP) and Part A items 9Q and 9R Cooperative Research Centre (CRC) contributions.

Work out your refundable R&D tax offset

Step 1

Show at Z1 Total notional R&D deductions the amount you show in Part A item 11 Total notional R&D deductions – label Z.

Step 2

Calculate your initial offset amount. If the amount at Z1 is:

  • $150 million or less, multiply the amount at Z1 by your corporate tax rate plus 18.5% – this is your offset amount
  • greater than $150 million      
    • multiply $150 million by your corporate tax rate plus 18.5%
    • multiply the excess over $150 million by your corporate tax rate
    • the sum of these 2 amounts is your offset amount.
     

Show your refundable tax offset at item 2 Refundable R&D tax offset – label U. Transfer this amount to the Company tax return 2023 at item 21 Refundable R&D tax offset – label U.

You do not need to complete item 3.

Item 3 Non-refundable R&D tax offset

If you answered Yes to Part D item 1 or item 2 and your notional deductions calculated under Part A item 11 – label Z total $20,000 or more, you can only claim the non-refundable R&D tax offset.

If your notional deductions calculated under Part A item 11 – label Z total less than $20,000, then you are only entitled to a tax offset for notional deductions for expenditure under Part A items 1A and 1B R&D expenditure – Research service provider (RSP) and Part A items 9Q and 9R Cooperative Research Centre (CRC) contributions.

Show at Z2 Total notional R&D deductions the amount shown at Part A item 11 – label Z.

Work out the non-refundable R&D tax offset

Step 1

Work out the R&D entity total expenses:

  • start with the amount you show in the Company tax return 2023 at item 6 Total expenses – label Q, less any amount that was already included at item 6 – label Q in a prior year
  • subtract the amount you show in the Company tax return 2023 at item 7 Accounting expenditure in item 6 subject to R&D tax incentive – label D
  • add the amount you show at Part A item 11 Total notional R&D deductions (X plus Y) – label Z in this Research and development tax incentive schedule 2023, less any amount that was included at item 11 – label Z in a prior year.

Show this amount at item 3 R&D entity total expenses – label V.

Step 2

If your item Z2 Total notional R&D deductions are:

  • less than or equal to $150 million, Z2 is your step 2 amount
  • greater than $150 million        
    • $150 million is your step 2 amount
    • your notional deductions amount less $150 million is your C1 amount.
     

Step 3

  • Divide your step 2 amount by your step 1 amount to 4 decimal places.
  • Multiply the result by 100 – to express it as a percentage to 2 decimal places.
  • Show the percentage at item 3 R&D intensity – label W.

Step 4

Populate the notional deductions applied column A1 and B1.

If your step 3 percentage is 2% or less, show your step 2 amount at A1.

If your step 3 percentage is greater than 2%:

  • at A1, show your R&D entity total expenses multiplied by 2%
  • at B1, show your step 2 amount minus the amount at A1.

Step 5

Working out A2, B2 and C2

  • To work out A2, multiply A1 by the sum of item 1 Tax rate – label R plus 8.5%.
  • To work out B2 if you have an amount at B1, multiply B1 by the sum of item 1 Tax rate – label R plus 16.5%.
  • To work out C2 if you have an amount at C1, multiply C1 by item 1 Tax rate – label R.

Step 6

Add up the amounts at A2, B2 and C2 and show the total at item 3 Non-refundable R&D tax offset – label A.

Show your non-refundable tax offset at item 3 Non-refundable R&D tax offset – label A. Transfer this amount to the Company tax return 2023 at item 21 Non-refundable R&D tax offset – label A.

Taxpayer's declaration

Complete the declaration on the Research and development tax incentive schedule.

If you do not lodge this schedule with your tax return, you must sign and date page 4 of the schedule.

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