Considerations for your R&D claim prior to 30 June 2024

Retaining documentation to substantiate your R&D claim is a key requirement of the program and a continued governance focus area for the ATO and AusIndustry. Companies must maintain technical, financial, and contractual documentation to substantiate the legislative criteria in the event of a review or audit. 

Documentation should be contemporaneous and kept in a readily accessible location to evidence that:

• You are the proper claimant of the R&D activities i.e., you are entitled to claim (rather than another entity) on application of the conducted for provisions
• The activities follow a systematic progression of experimental work
• The outcome of the experiments could not have been known or determined in advance
• Experiments are conducted for the purpose of generating new knowledge
• Expenditure is clearly linked to an eligible R&D activity.

Complex group structures can often result in issues with R&D expenditure being incurred by or claimed by the wrong entity. It is essential that R&D amounts are incurred by an eligible Australian R&D entity by the end of the financial year to ensure eligibility for the R&D Tax Incentive.

Amounts incurred to an associate of an R&D entity have special timing rules related to when a R&D tax offset arises. The trigger to claim a potential R&D tax offset is the year in which the incurred associate expenditure amount has physically been paid. 

Therefore, R&D amounts incurred to associates of a R&D entity in 2024 are required to be paid by 30 June 2024. This is necessary in order for any potential benefit of the costs to be considered in the 2024 R&D claim. This is a particular focus area of the regulators and the ATO has recently released guidance material in relation to activities delivered by associated entities. Further information can be found here.

Expenditure on overseas R&D activities can only be claimed if the company holds a valid R&D Overseas Finding certificate. If you are looking to register activities undertaken overseas and claim the subsequent costs, you are required to have applied for and received a successful Overseas Finding Certificate from AusIndustry in advance. The deadline to lodge a R&D Overseas Finding is the end of the financial year; 30 June 2024.

If you have a R&D Overseas Finding from previous years, it is critical that the information provided in the application continues to hold true in relation to the activities to be undertaken and the estimate of expenditure provided. For example, you should ensure that the activities being performed overseas in 2024 do not materially deviate from those covered by the certificate.

Find more information on R&D Overseas Findings here.