There are two types of RDTI offset available depending on the tax features of the claimant entity, with the benefits differing slightly under each.

• Companies with an aggregated turnover of less than $20 million are entitled to receive the refundable R&D tax offset, equal to your corporate tax rate (25% or 30%) plus an 18.5% premium. For example, if the company tax rate is 25%, the R&D tax offset rate would be 43.5%. The offset is first applied to any tax payable for the relevant income year, with any amounts in excess refunded in cash. For companies that are pre-revenue, this typically results in the full offset amount being received as a refund.
• Companies with an aggregated turnover of greater than $20 million are entitled to receive the non-refundable R&D tax offset, calculated as your corporate tax rate (25% or 30%) plus an incremental premium determined based on your R&D intensity. All eligible R&D expenditure up to 2% R&D intensity will receive a premium of 8.5%, while any expenditure incurred above 2% R&D intensity will receive a premium of 16.5%. Like the refundable R&D tax offset, the non-refundable offset is first applied to any tax payable for the relevant income year. However, any amounts in excess are carried forward to be applied against future tax payable.
   

For an R&D activity to be eligible, it must meet the definition of a core or supporting R&D activity as per Division 355 of the Income Tax Assessment Act 1997. In order to make an RDTI claim, you must have at least one core R&D activity.

Core R&D activities are experimental activities:

• Whose outcome cannot be know or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:
  • Is based on principles of established science; and
  •  Proceeds from hypothesis to experimentation, observation and evaluation, and leads to logical conclusions; and
  • That are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).

Supporting R&D activities are activities that are directly related to core R&D activities.
 

A key requirement of the RDTI is that both the activities undertaken and the expenditure claimed can be substantiated via contemporaneous documentation. During ATO and DISR review activity, claims are often rejected on the basis that adequate, appropriate contemporaneous documentation is available to demonstrate eligibility.

Ideally, RDTI claimants should be able to:

• Clearly demonstrate that the R&D eligibility criteria have been satisfied; and
• Clearly demonstrate the nexus between eligible expenditure claimed and the R&D activities undertaken.

Examples of the types of documentation we recommend companies maintain throughout the income year with respect to their R&D activities include:

• Project plans
• Contracts/research agreements
• Experimental protocols/test plans
• Patent searches
• Background research conducted
• Research notes
• Experimental results
• Reports
• Employee timesheets
• Invoices
• Funding agreements
• Progress reports from contractors
• Asset registers.

While not exhaustive, the list provides an indication of the types of records DISR or the ATO may request in the event of a review.

Our R&D team can assist with the following:

• Identification of RDTI opportunities
• Preparing or reviewing RDTI claims
• Advance Overseas Findings
• DISR and/or ATO reviews
• R&D financing
• R&D documentation and governance
• Inbound R&D – assistance with setting up global entities in Australia to undertake R&D activities within Australia
• Early-Stage Innovation Company (ESIC) incentives
• Digital Games Tax Offset (DGTO)
• Identification of other government grant and incentives opportunities.