R&D Tax Incentive deadline put back to Sept

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// If you think you’ve missed out on claiming R&D tax benefits for last financial year, you’ve now got a bit more time to lodge…

Due to COVID-19, the government is giving businesses an extra five months to get their R&D tax incentive (RDTI) claims in for last year. So, rather than rushing them in by the end of this month, you now have until the end of September to make your claim for financial year 2018/19.

A Brief History of RDTI

First introduced in 2003, and building off earlier R&D grants introduced in the 1980s, the R&D tax incentive (RDTI) has been one of the major funders of early stage startups over the past few decades.

RDTI’s purpose was (and is) to encourage Australian innovation, partly reduce the risk and build a more competitive economy.

“The R&D tax incentive is a generous broad-based entitlement program supporting companies developing new or improved products, processes or services,” Natalie Milne, BDO’s Head of Tax (and co-host of the Startup West podcast) told Startup News.

BDO’s Natalie Milne

Upwards of $4B a year is handed out through RDTI to innovators across the land, from the ATO, and as such it puts many other startup grants and incentives in the shade.

The system works through self-assessment – that is, the startup or innovator has to maintain clear and accurate records of all their eligible R&D activities during the financial year, then claim it back when they lodge their tax returns for the year.

For companies making losses, an RDTI claim can mean you can get cash back; when in profit the scheme can be used to reduce your corporation tax liability.

“For eligible companies who have a group annual turnover of less than $20M the company will be able to access a 43.5% refundable R&D tax offset.

“This equates to a net after-tax benefit of 16c for each dollar spent on eligible R&D activities. Companies in a tax loss situation may be able to ‘cash out’ the refundable offset (assuming no other tax liabilities exist) and receive up to 43.5c for every eligible dollar of R&D expenditure,” Natalie said.

Natalie Milne, BDO

Applications for RDTI are fairly complex, and are done in addition to – and at the same time as – your tax returns. Most startups do their application with their accountant and/or an R&D tax specialist.

AusIndustry holds regular free info sessions, and other resources are viewable here.

Extension of R&D Application lodgement deadline

Up until this year, R&D registration applications were due 10 months after the end of the financial year, which would mean that the FY2018-19 tax year RDTI application would normally have to be lodged at by 30th April 2020.

However, that’s now been extended to 30 September 2020. You don’t need to request an extension, the extra five months time frame is automatic.

So, if you’ve not claimed before, and reckon you’ve spent at least $20K in R&D in the last year, it might be worth looking into…

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For further information on the R&D Tax incentive and how it can help your business, please contact Natalie Milne or Leigh Pearce at BDO.

Disclosure: BDO is a sponsor of Startup News.

Main Photo: Polina Zimmerman.