The R&D Tax Incentive Application

The R&D Tax Incentive application process can be daunting. If you’re thinking of applying yourself, here are the answers to some common questions.

What does the R&D Tax Incentive application process involve?

The application process requires that you register your R&D activities with AusIndustry on an annual basis.

The application form is available via the R&D Tax Incentive customer portal and it requires the following:

• • company and contact information.
  • descriptions of R&D projects and activities.
  • activity dates and locations; and
  • expenditure estimates for each activity

Each R&D project requires a description of the overarching objective, followed by the ‘Core’ and ‘Supporting’ R&D activity descriptions. Core R&D activity descriptions must address all aspects of the eligibility criteria, including:

• • The hypothesis
  • The new knowledge that is intended to be produced
  • How you determined the outcome could not be known in advance, including the sources of information that were investigated to establish the knowledge gap
  • The experiment and how it tested the hypothesis
  • How the results from the experiment were evaluated, or plan to be evaluated
  • The conclusions that you reached from experiments in the income period
  • The evidence that was kept

Supporting activities require a briefer description of the activity and how it directly supports the core activity.  In some cases, you may also need to address the dominant purpose of the activity. Supporting activities must be assigned to one or more core activities, including a core activity that you intend to conduct in the future.

What deadlines do I need to be aware of?

You must register activities with AusIndustry within 10 months after the end of your income year.

Applications received after the deadline are deemed late and will not usually be accepted. Although, you can request an extension if there are exceptional circumstances, and the delay is considered minor.

How much information do I need to provide?

You need to provide sufficient information to satisfy AusIndustry that your R&D activities meet the requirements. However, there are character limits to the application form itself, so you will need to think carefully about the best way to convey your activities.

For a core R&D activity description, try and make sure you address each of the following:

Unknown outcome

• • Be specific about the technical unknown; this is an objective test based on worldwide publicly available information
  • Describe what was known about how to achieve your outcome at the time you commenced your core R&D activity and why there was still a knowledge gap

Experiment:

• • Hypothesis – this is your idea or proposed explanation for how you could achieve your outcome. A hypothesis should be a specific and measurable statement that references technical variables and parameters. Avoid hypothesis statements that:
    • Consider commercial, economic or business features often characterised by terms such as ‘feasible’, ‘viable’, ‘cost effective’, ‘efficient’
    • Cannot be proven or disproven by the experiment
  • Be sure to describe all elements of a systematic progression of work i.e.– the experimental procedure, your observations, your assessment and evaluation of the results and the logical conclusions that you draw from the experiment. You may conclude that you cannot achieve your desired outcome or that you need to do further R&D. Whether your results support your hypothesis or not, your R&D activities may still be eligible for the R&D Tax Incentive

New knowledge:

• • explain what is new or improved about your product/process/material/device/service (compared to similar existing offerings) and
  • show that one of the substantial purposes for you to conduct your core R&D activity was to generate new knowledge.

How do I know if I’ve been approved?

AusIndustry does not “approve” your application. Once you submit your application in the R&D Tax Incentive customer portal, you will receive a Notice of Registration Letter which confirms that the activities have been registered. As stated in the letter “registration does not imply eligibility of your R&D activities and it is not an indication of compliance with other R&D Tax Incentive requirements”.

The R&D Tax Incentive is a self-assessment program, which means that applicants are responsible for ensuring that their R&D activities and related expenditure meet the legislative eligibility criteria.

The key to a successfully applying to the program is to keep detailed records that can substantiate your claim. A review or audit of your claim by AusIndustry or the ATO often take place after activities have been registered, after you’ve received your benefit and even after you’ve spent it.  Like all tax affairs, you should retain your records for a minimum of 5 years.

The benefits of using an R&D tax incentive consultant

There are many benefits to using an R&D consultant, the key benefits being:

• • Expertise – R&D consultants have specialised expertise in the R&D Tax Incentive program requirements, including the latest technical and administrative guidance. This can ensure eligibility criteria are met.
  • Technical writing – Consultants can adeptly describe the technical activities in a language understandable to AusIndustry case managers. Many companies struggle to explain their innovations in a way that best addresses the eligibility criteria
  • Compliance – Experienced consultants will make sure you understand all eligibility requirements, not only whether your activities are eligible. You must also ensure your entity is eligible under the program and comply with a range of integrity rules. The ATO has recently clarified the R&D tax program integrity rules after observing a lack of understanding and adherence to these rules amongst applicants. You can read about here.
  • Record keeping – Consultants can help implement processes and systems to contemporaneously capture evidence required to substantiate activities. This optimises claim outcomes.
  • Cost savings – Their expertise reduces the likelihood of your claim being reviewed, saving you internal time and overheads spent.
  • Advisory – They act as a strategic advisor on how to identify and manage R&D activities to maximise benefits over the long-term.

The right R&D tax consultant becomes an invaluable asset in navigating the complexities of the R&D Tax Incentive program successfully. NOAH Connect is one of Sydney’s leading government funding consulting firms, helping companies with R&D Tax Incentive applications for nearly 20 years. Our expertise in claiming for companies of all sizes and across all sectors will help you reap the benefits of the R&D Tax program, without the hassle.