With the 30 June 2024 End of Financial Year (EOFY) fast approaching, we highlight some key considerations and reminders to help businesses make the most of their R&D tax claims.
Payments to Associates
To claim R&D expenditure incurred to associates, it is important these amounts are paid before by 30 June 2024. Any unpaid amounts will not be claimable in the 2024 income year and must be carried forward until paid.
Recent ATO scrutiny highlights the need for caution, especially regarding payments via loans, 'round robin' transactions and constructive payments.
Overseas Finding
To claim overseas R&D expenditure, companies must ensure they submit an Overseas Finding by 30 June 2024. The conditions for an Overseas Finding include:
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Overseas R&D activities have a scientific link to Australian core R&D activities
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The R&D activities cannot be solely conducted in Australia
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Overseas costs are less than the cost of R&D activities conducted in Australia
The Federal Court judgement in T.D.S Biz Pty Ltd v Commissioner of Taxation, handed down on 29 June 2023, affirmed that companies must hold an Overseas Finding when claiming expenditure on goods developed overseas, even where those goods are purchased for use in Australian based R&D activities. Companies that routinely purchase equipment and components overseas for use in Australian R&D activities should therefore seek advice on their eligibility.
Advanced Finding
The recent decision by the Administrative Appeals Tribunal (AAT), in the matter of GQHC v Commissioner of Taxation [2024] AATA 409, has highlighted that in absence of a finding by Industry, Innovation and Science Australia (IISA), the Commissioner has the power to make decisions as to whether a R&D entity's activities constitute eligible R&D activities.
A key takeaway from this decision is that companies should consider the merits of applying for an Advanced Finding from AusIndustry on the eligibility of its R&D activities. This will provide the entity certainty that their R&D activities are eligible.
Advance Findings must be lodged by 30 June 2024 and will cover the 2023-24 income year, and the two following income years.
Record Keeping
Substantiation of R&D activities has historically been a major focus of AusIndustry compliance reviews. Hence, it is important that companies ensure they have contemporaneous documentation of R&D activities conducted and associated expenditure records are maintained.
The end of financial year period also presents an opportunity for companies to review and improve record-keeping processes for future income years.
Need assistance or guidance for your R&D claim?
For more information on these considerations and other R&D enquiries, please reach out to Moore’s R&D Tax Incentive and Government Grant consultants.