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While we rejoice in a world moving into recovery mode, in preparation for the 2023 financial year, it’s important for organisations with innovation ambitions to reflect on key announcements related to the R&D Tax Incentive and consider grant programs you can – or should – consider.
The start of the 2023 financial year will see the changes introduced in the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 and announced in the October 2020 budget come to life as companies prepare their R&D claims for the 2022 financial year. The changes link the R&D tax offset rate to the R&D entities’ corporate tax rate.
In addition, the changes introduce a tiered R&D intensity calculation for companies with an aggregated turnover greater than $20m, providing additional incentives for larger companies.
The table below outlines the R&D tax offset rates effective for income years starting on or after 1 July 2021:
The Commissioner published Taxation Ruling TR 2021/5 to help companies determine whether expenditure incurred on R&D is ‘at risk’. The ‘at risk’ rule applies to deny notional R&D deductions for expenditure incurred where consideration will be received irrespective of the results of the activities. The ruling provides further clarity of the definition of ‘consideration’ to include both monetary and non-monetary benefits. It also provides a range of examples where the ‘at risk’ rule may be triggered.
AusIndustry released the R&DTI Determination for Clinical Trials to simplify the registration of R&D activities and Advance and Overseas Finding applications for the biotechnology sector. Broadly, if the clinical trials satisfy the criteria set out in the Determination, those activities are eligible core R&D activities under the R&DTI. The goal of the Determination is to reduce the compliance and administrative burden of registering R&D activities that fall under this Determination, as well as providing certainty to claimants.
Ed Husic has been appointed as Australia’s new Minister for Industry and Science. In his first address as Minister, he pledged to fix Australia’s brain drain and research translation problems as part of a pandemic recovery, flagging billions in strategic investment for emerging and medical technologies to transform Australia into a country of ‘makers’ not ‘takers’. He also showed his aim to create an environment to foster local technology innovation, including software-based start-ups.
AusIndustry released updated Software Development Guidance. The release comes after several years of claimants seeking further guidance on the eligibility of software R&D activities. This guidance is supplementary to the previously released R&DTI Guide to Interpretation. Key updates include:
The following decisions have been handed down by the AAT and Federal Court related to R&D:
The Federal Government commissioned a report on the dual agency administration of the R&DTI by the ATO and Industry Innovation and Science Australia. Published in March 2022, the report concluded that the dual agency administration model of the R&DTI program should be maintained and provided a number of recommendations and observations to improve the model. Read more on the recommendations and observations here.
The EMDG program supports Australian businesses with turnover of less than $20 million with their export marketing activities by providing three tiers of support, with a maximum annual grant of $150,000 available for up to 8 years.
The 2023 EMDG program opens on 6 July 2022 and will be open for 6 weeks, closing on 17 August 2022. Read more about the program and eligibility criteria here.
As we enter the 2023 financial year, key items to keep an eye out for include:
