What is the R&D Tax Incentive?

The R&D Tax Incentive is government funding via your company tax return. It is used to fund innovation within Australian businesses, whether it’s a new product development, operation process efficiencies or enhancing your existing products.

It is a very generous rebate that helps you conduct more R&D, but it can be complex to administer and ensure you are maximising the benefits. Companies are required by AusIndustry and the Australian Taxation Office (ATO) to have systems and processes in place to identify, evaluate effectively, and record eligible R&D activities and related expenditures.

So, you need to align your R&D Processes with the legislation to include the required documentation, you might like to refer to our R&D Process Optimisation eBook.

Getting started with the R&D Tax Incentive, find out now!

Our Diagnostic & Strategy Training Online Course can help you diagnose your current R&D process and process record-keeping. We will introduce our 6-step process framework to you and help you identify the best way to optimise your R&D process record-keeping.

The R&D Tax Incentive applies to R&D that will generate new knowledge, that is experimental in nature. It needs to be risky because  no one or any information accessible to you can tell you how to solve the problems and meet the objective.

There are six sectors identified by Ausindustry and ATO:

• Agrifood Sector
• Biotechnology Sector
• Built environment Sector
• Energy Sector
• Manufacturing Sector
• Software development Sector

You can use the following link to access the Australian Government Sector Guides for R&D Tax Incentive applicants for more information. 

Whichever R&D field you are in, we can help you to optimise your R&D Process and process record-keeping. You will need to align your R&D Processes with the legislation to include the required documentation, you might like to refer to our R&D Process Optimisation eBook.

Start by checking your company eligibility:

1. An Australian Company
2. Spending more than $20,000 on eligible R&D.

For more information, you can view here.

Then check your R&D eligibility:

• Conduct Core R&D that meets the criteria in FAQ 1 above
• Before that your Core R&D is not an excluded core R&D activity
• Conduct Supporting R&D activities that directly relate to a core R&D activity (and, in some cases, that you conduct for the dominant purpose of supporting a core R&D activity)

For more information, you can download the R&D Tax Incentive Guide to Interpretation, or visit here.

To claim the Core R&D and associated Supporting R&D expenses, you need to capture information about how to decided you needed the R&D and how you determined the eligibility, and how you confirmed the Hypothesis was achieved or not.

There are many process steps that need to be included in your business processes and systems so they are not forgotten, you might like to refer to our R&D Process Optimisation eBook.

As you know, the R&D Tax Incentive is for businesses conducting innovation and developing new products or services. It’s a self-assessment as part of your application for the rebate. Therefore, you will need records that substantiate your claim. By records, we mean detailed documents and evidence that will satisfy the Government’s requirements. These requirements are stringent and very specific.

What to be aware of is, the Government have made recent changes that make it mandatory to have the right documents in place as part of the application form. If a request for documents is made as part of spot-checking of applications, you must produce the documents within 30 days.

To help you determine whether you are on the right track we have a Self Audit questionnaire you can complete and receive a personal report written by our consultants, complete it here.

We also have our R&D Tax Implementation Checklist that will allow you to assess how well you are keeping your records and what can be improved. By using our checklist, you will start:

• Keeping all the right records to fully claim under the Tax Incentive
• Find out how much more you could claim with the right records
• Review the templates to see how quick and easy it can be to document your claim
• Make it easier for your accountant by being prepared (Benefits you and your accountant)

Moreover, we have several Training Workshops and Service & Coaching options that can help you can keep you on track:

• Instructor-Led Training Workshops: One of our instructors can provide personalised and comprehensive Training and Workshops for you and your team.
• Online Training Course: Learn at your own pace with the Online Video Courses that also include a Template pack to get you started quickly.
• R&D Tax Incentive Template Packs: Comprehensive template pack includes all templates that you need to prepare for your claim. All templates have instructions for each section, you can easily understand and fill in the templates.
• Period Auditing Options: Arrange for our team to periodically spot check or audit your R&D projects to verify process adherence.
• Monthly Coaching & Support Options: Monthly instructor access for assistance with R&D process optimisation, template usage, audits and governance.

If you are not sure what help you should get, please book a 10-minute meeting, we can help you to choose.

The R&D Tax Incentive is for businesses conducting innovation and developing new products or services. It’s a self-assessment as part of your application for the rebate. Therefore, you will need records that substantiate your claim. By records, we mean detailed documents and evidence that will satisfy the Government’s requirements. These requirements are stringent and very specific.

The company must maintain adequate records to prove to AusIndustry and the ATO:

• That they carry out qualified R&D activities (i.e., core R&D activities and ancillary R&D activities);
• They incur eligible expenditure in respect of the activity 1; and
• Their R&D activities and expenditures meet all other legislative requirements under the Program, such as generating new knowledge and having a scientifically expressed Hypothesis
• Information about how the R&D fits into a Product Strategy
• That is conducted as a proper R&D Project with budgets and timelines
• Comprehensive planning of experiments and tests to be conducted to prove or disprove the hypothesis
• Periodic review of progress and experiment results to adjust and pivot the Hypothesis

As you can see the relevant expense records include those normally kept supporting income tax returns. But you need to add to those detailed documentation relating to the planning and progress of research and development activities. The records maintained by individual claimants will vary according to the nature of their business and their research and development activities.

To make sure you have all records in place, we can help you optimise your record-keeping process. Take a look at our Online Courses, you will find all relevant knowledge and templates about how to enhance your record-keeping process and how to increase your tax benefits. This is a great head start for your team so they don’t have reinvent the wheel.

We can help you to determine whether you are on the right track by doing a Self Audit questionnaire, you can complete and receive a personal report written by our consultants. Complete it here.

Also, we highly recommend our Instructor-Led Training Courses, one of our instructors can provide personalised and comprehensive Training and Workshops for you and your team. Check it out! 

During an Audit, AusIndustry and the ATO will ask you to provide evidence of your R&D activities conducted within one to four years. Therefore, having well-managed record-keeping is necessary. The recent changes made by the Government to the application R&D Tax Claim form means that the evidence you have maintained in the past for a claim may not be sufficient to prove that your R&D is eligible or to defend your claim from now on.

The changes have aligned the evidence requirements to more closely match the R&D Tax legislation and require far more stringent documentation than in the past.  This includes clearer and more detailed documented evidence around your hypothesis, the new knowledge you need to discover and the experiments you will conduct to verify each hypothesis.

You must also be able to provide follow up evidence of the experiments, i.e. the outcomes that are assessed in terms of each hypothesis. You will also need to directly connect the expenses related to the activity, and these comprise your rebate application.

Use our R&D Tax Incentive Implementation Checklist to quickly find out if you have all the right records in place to claim under the grant fully. Require now!

We provide a self-audit option for you to know how well you are keeping records and how much you are missing out on. by doing a Self Audit questionnaire, after the completion, you will receive a personal report written by our consultants. Conduct now!

We also have Periodic Auditing services to help you audit a project in detail and spot check how well the R&D Manual is being followed. So we can help you maximise your adoption of the Frameworks and the R&D Manual processes, make sure that you will be confident during an audit.

If you have been notified of an audit you may like to enquire about our R&D Records remediation service. We will work with you to find the records that AusIndustry and the ATO may want to see and also those they may have asked for in the Request for Information, book an initial 10-minute consultation to discuss your specific situation.

Important!

Before you start claiming, you should have all your well-managed and correct records in place. Over the last ten years of working with the R&D Tax Incentive, the most common mistake we see is the documentation doesn’t meet the correct ‘scientific language and format’ that the Government require and that there is not a complete set of ‘documents’ to substantiate the ‘claim’.

Not getting this right makes your application to claim ineligible. To get more information of how we can help you with your record-keeping process, please see FAQ 5.

We can help you with the claim process by introducing to you the RDTI Portal Guide. This guidance contains all features in the RDTI Customer Portal and notes to help you find relevant documents and details from our Template Packs. This will increase the efficiency of your claiming process and brings you convenience. Download the RDTI Portal Guide now!

The RDTI Portal Guide is also included in our Workshops, Template Packs and Online Courses. Let’s find out now! 

It’s all about how you document your work

The Government provides specific “guidance” on what documents they want provided as evidence of the R&D work you are undertaking.

You need to cover the following areas to the right level of detail:

• Product strategy with project roadmap and new knowledge assessed
• R&D project documentation with project hypothesis explained

✓ R&D project eligibility proof for core R&D activity documentation

✓ R&D project timelines, plans and budgets that have been monitored.

• R&D work records that track time and materials as core and supporting
• Experiment plans to prove hypothesis documented*
• Experiments conducted and evidence recorded with the results evaluated/reported*
• Minutes of meetings to formally evaluate results, correct, and iterate on the hypothesis

The areas marked with an asterisk* need to use scientific language to describe your hypothesis, experiments conducted to test the hypothesis and capture the new knowledge you produce.

What is the right level of detail?

You will need a way to ensure you capture enough evidence without going overboard. The best way to do this is to have a set of templates used for all R&D projects and checklists to make sure you don’t miss any, leaving holes that may be discovered in an Audit. If you haven’t got time to check out our Template Packs and the R&D Tax Incentive Implementation Checklist, why don’t you find out now!

Maybe you would like to get a self-assessment of your R&D tax claim, check out our Self-Audit service. By doing a Self Audit questionnaire, you can complete and receive a personal report written by our consultants. You can find out how well you are keeping records and how much you are missing out on.

If you are not sure what help you should get, book a 10-minute consultation to discuss your specific situation.

The Australian Government offers rebates on R&D work that meets specific criteria to encourage Australian businesses to innovate.

Over the last ten years of working with the R&D Tax Incentive, the most common mistake we see is the documentation doesn’t meet the correct ‘scientific language and format’ that the Government require and that there is not a complete set of ‘documents’ to substantiate the ‘claim’. Not getting this right makes your application to claim ineligible.

Use our checklist to ensure you do not fail your claim this year. Our checklist is comprehensive and will help you to align your work and supporting documentation, so that come claim time, you will have everything your accountant requires to complete it and ensure that nothing found within the application triggers an audit. Find out more about our Checklist.

Maybe you would like to get a self-assessment of your R&D tax claim, check out our Self-Audit service. By doing a Self-Audit questionnaire, you can complete and receive a personal report written by our consultants. You can find out how well you are keeping records and how much you are missing out on.

We have several training options for you that can help you optimise your R&D Process and maximise your R&D Tax benefits:

• Instructor-Led Training Workshops: One of our instructors can provide personalised and comprehensive Training and Workshops for you and your team.
• R&D Tax Incentive Template Packs: Comprehensive template pack includes all templates that you need to prepare for your claim. All templates have instructions for each section, you can easily understand and fill in the templates.
• Online Training Course: Learn at your own pace with the Online Video Courses that also include a Template pack to get you started quickly.
• Period Auditing Options: Arrange for our team to periodically spot check or audit your R&D projects to verify process adherence.
• Monthly Coaching & Support Options: Monthly instructor access for assistance with R&D process optimisation, template usage, audits, and governance.

If you are not sure what help you should get, book a 10-minute consultation to discuss your specific situation.

On average, we see an increase between 30-50% in the total claim amount. This is because when the work is documented correctly, the full breadth of activity is captured in the claim – even including the time spent completing the paperwork!

What can you claim?

1. Any activity that is related to investigating something “no one” knows the answer to, when developing a process, system, product or device.
2. Your R&D needs to be planned and documented and broken down into your core activities. The work supporting this such as planning and documenting are supporting R&D activities.

Both your core and supporting activities – yes even the time creating the paperwork is claimable including:

1. The time spent formulating a Hypothesis on how the New Knowledge can be determined
2. The experiments to prove or disprove your hypothesis
3. Updating the hypothesis and doing experiments repeatedly until you have the outcome you are looking for.

If you haven’t taken the time to take our quick R&D Tax Incentive Checklist, why not do it now and see exactly what the documentation framework looks like.

To maximise your benefits of the R&D Tax Incentive, we are providing Process Framework and Templates to help you optimise your R&D Process, well-maintain and store your Project records. We check that Time and Material expense tracking mechanisms are implemented and working as per the R&D Manual to ensure cost reporting is working. If the processes can be improved, we will update the manual for you and disseminate the changes. Make sure you will be confident during an Audit to claim more.

Here are some options that you can choose from:

• Instructor-Led Training Workshops: One of our instructors can provide personalised and comprehensive Training and Workshops for you and your team.
• R&D Tax Incentive Template Packs: Comprehensive template pack includes all templates that you need to prepare for your claim. All templates have instructions for each section, you can easily understand and fill in the templates.
• Online Training Course: Learn at your own pace with the Online Video Courses that also include a Template pack to get you started quickly.
• Period Auditing Options: Arrange for our team to periodically spot check or audit your R&D projects to verify process adherence.
• Monthly Coaching & Support Options: Monthly instructor access for assistance with R&D process optimisation, template usage, audits, and governance.

If you are not sure what help you should get, book a 10-minute consultation to discuss your specific situation.

An Advance Finding is a finding by the Board, under section 28A of the Industry Research and Development Act 1986, about whether an activity meets the requirements in the Income Tax Assessment Act 1997 to be either a core R&D activity or a supporting R&D activity. An Advance Finding can be sought in relation to:

• activities conducted in the current income year, whether completed or commenced in that year; and
• proposed activities to be conducted in the subsequent two income years.

Only an eligible R&D Entity can apply for an Advance Finding or Overseas Finding. You can view FAQ 3 to have more information or visit the ATO website to see if you are eligible.

For more information about the Advance Finding and how to apply, please visit here.

Before you start your application, you should make sure that all your records are well managed. You will need to align your R&D Processes with the legislation to include the required documentation, you might like to refer to our ebook. From our 6-Step R&D Tax Incentive Process Optimisation eBook you will learn:

• How to optimise your R&D Processes to keep accurate and complete records
• Ensure that all your records are captured in the R&D process steps right when they are performed
• Ensure that no extra work is added beyond the typical project tasks that would need to perform to achieve their goals.

Download now!

We also have a self-audit option for you to know how well you are keeping records and how much you are missing out on. By doing a Self-Audit questionnaire, after the completion, you will receive a personal report written by our consultants. 

If you are not sure what help you should get, book a 10-minute consultation to discuss your specific situation.

To find an overseas R&D activity eligible it must meet each of the following four requirements:

1. Your overseas R&D activity must be an eligible R&D activity
2. There must be a scientific link to an Australian core R&D Activity
3. The overseas R&D activity must not be able to be conducted in Australia or its external Territories.
4. The costs of overseas R&D activities must be less than the costs of related R&D activities undertaken solely in Australia.

For more information you can view here. There is also an Application Guidance for Advance and Overseas finding guide that you can download.

What we can do, is provide you with the Instructor-Led Training workshops or Service & Coaching Options, discuss with you about your Overseas R&D activities and help you prepare your evidence, enhance your record-keeping processes, make sure you can maximise your benefits.

If you are not sure what help you should get, book a 10-minute consultation to discuss your specific situation.

If flagged as At-risk, AusIndustry will notify the areas they are concerned about and advise you that you will be reassessed in 12 months. This gives you time to review your records and processes to improve them before they come back for the Audit.

But don’t worry, it’s all about how you document your work. The Government provides specific “guidance” on what documents they want provided as evidence of the R&D work you are undertaking.

You need to cover the following areas to the right level of detail:

• Product strategy with project roadmap and new knowledge assessed
• R&D project documentation with project hypothesis explained

1. 1. R&D project eligibility proof for core R&D activity documentation
   2. R&D project timelines, plans and budgets that have been monitored

• R&D work records that track time and materials as core and supporting
• Experiment plans to prove hypothesis documented*
• Experiments conducted and evidence recorded with the results evaluated/reported*
• Minutes of meetings to formally evaluate results, correct, and iterate on the hypothesis

The areas marked with an asterisk* need to use scientific language to describe your hypothesis, experiments conducted to test the hypothesis and capture the new knowledge you produce.

What is the right level of detail?

You will need a way to ensure you capture enough evidence without going overboard. The best way to do this is to have a set of templates used for all R&D projects and checklists to make sure you don’t miss any, leaving holes that may be discovered in an Audit.

Using templates is the path of least resistance.

We can assist with making sure you can pass and Audit and resolve your At-Risk issues! Find out our R&D Tax Incentive Audit Preparation & Assistance Services:

• Rapid Response RFI Review Service: we will review your documentation of compliance, provide templates to ensure your language and structure are correct and assist with answering the questions from AusIndustry or the ATO.
• Comprehensive Audit Preparation: we offer assistance to make sure this is done quickly, correctly and comprehensively to ensure your avoid a failed audit review.
• Find out more.

If you are not sure what help you should get, book a 10-minute consultation to discuss your specific situation.

The Government have made recent changes that make it mandatory to have the right documents in place as part of the application form.

If a request for information is made as part of spot-checking of applications, you must produce the documents within 30 days.

The documents they expect to be available for review should your application be flagged for checking may relate to anything from your entire R&D work program – from R&D project eligibility proof through to the hypothesis and experiments conducted and the evidence of these recorded. If you fail to locate the proper evidence or the information within the documents is not considered satisfactory, this will at a minimum flag you as “At-risk” or, worst case, trigger an audit.

So, process driven record-keeping is essential to avoid tedious searching for information. The above may seem like a lot of work, but the bulk of the above can be done quickly using templates and makes things a lot easier in house. It removes the need to ‘create’ new documents, takes the guesswork out of the process by providing a checklist to work through and, once in place, saves time in the process.

It is also the best way to manage the risk of triggering an audit with missing documentation at application time.

Why don’t you try our Audit Preparation Services, we can review the documentation for compliance, provide templates to ensure language and structure are correct, review your application of core and support R&D and assist you to answer the questions from AusIndustry or the ATO. Find out now!

Download our R&D Tax Incentive Implementation Checklist, that will allow you to assess how well you are keeping your records and what can be improved. By using our checklist, you will start:

• Keeping all the right records to fully claim under the Tax Incentive
• Find out how much more you could claim with the right records
• Review the templates to see how quick and easy it can be to document your claim
• Make it easier for your accountant by being prepared (Benefits you and your accountant)

However, if you are still not sure about what help you can get, book a 10-minute consultation with us, we will see what we can do to help you.

You don’t need to worry about the audit if you have well-managed record-keeping. During an audit, they will ask you to provide evidence of your claim, for example, your project activity list, experimental test plan and results. So, you just need to keep all your records; when they ask, you provide the evidence to them.

The way to solve your headaches, is to create a system supported by templates. It removes the need to ‘create’ new documents, takes the guesswork out of the process by providing a checklist to work through and, once in place, saves time in the process. It is also the best way to manage the risk of triggering an audit with missing documentation at application time.

We can help you if you are concern about your current record-keeping and claim process. We have a complete set of templates included Workshops and Online Courses if you wanted help to implement or check how you are applying the templates to your work. Check out our Workshops and Courses.

Book a 10-minute consultation with us, and we will see what we can help to reduce your headache.

Some tax agency can help you advance your refund. When you apply for the R&D Tax Incentive, there is an opportunity for your accountant to advance your tax refund, giving you the cash flow boost up to 80%. Not only you can get an early tax refund, but also can improve your capital and cash flow position. This allows you to spend more money on R&D and have better budgets.

Here is the informtation of the R&D Tax Credit Loan from Fund Squire: An R&D loan is a new type of financial instrument that allows a company to use its future R&D tax credit payments as collateral for an affordable loan. The R&D tax credit is a sustainable source of operating cash for many Australian firms, every year. View more.

Here is the information of Radium Advance from Radium Capital: A Radium Advance is a one-off burst of capital when your business needs it most. Don’t wait up to 18 months for your tax refund. A Radium Advance is a cash flow friendly and cost effective way to finance your R&D now. View more.

We provide R&D Process optimisation through Workshops and Training courses that will help you keep the records required by the Radium Capital and Fund Squire in order to provide you with a loan. Find out our Courses and Templates.

Before you get too far, it’s better for you to conduct a Self-Audit questionnaire to receive a report, you will know how well your evidence are managed and how much you are missing out on.

If you want to discuss your specific situation, book a 10-minute consultation with us.

The best way of keeping the right evidence in the future is to create a template-supported system. You don’t need to ‘create’ new documents, takes the guesswork out of the process by providing a checklist to work through and, once in place, saves time in the process. It is also the best way to manage the risk of triggering an audit with missing documentation at application time.

The record-keeping will need to be built into the day-to-day business processes so that they are automatically generated and stored. Getting some help to train the R&D Team is invaluable, incentivising them will help, the more they understand why they need to do it, the more likely they will do it.

In our Instructor-Led Consistency Workshop, one of our instructors can provide personalised and comprehensive Training and Workshops for you and your team. We will help you to choose the right work management system, time & cost tracking system, increase the efficiency of store and find the relevant records. We will also provide you with comprehensive template packs to help you minute all records and keep them in an easy-to-find way. Therefore, in the future, when you need the evidence, you can just open the right folder and pick the relevant document.

Our Monthly Coaching & Support Options provide coaching sessions each month, help you check your documentation process, review documents, and help you prepare and improve your R&D Project documents. We will assist and monitor in your Technical Committee meetings. All we will do is keep you on track and make sure all required records are complete and correct.

If you are not sure what help you should get, book a 10-minute consultation to discuss your specific situation.