R&D expenditure to associates
As part of the R&D Tax Incentive, companies incurring expenditure to an associate may be eligible to obtain an R&D tax offset for that amount, provided that the amount owed has been paid to the associate within the year of the claim.
Who is an associate?
Associates are those entities that, by reason of family or business connections, are connected with another entity and might appropriately be regarded as being associates of a particular entity such as shareholders, company directors or other related legal entities.
Your entity is connected with another entity if:
Either entity controls the other entity
Both entities are controlled by the same third entity
R&D expenditure incurred to associates
Paying an amount to an associate can include making a constructive payment, where a payment is made but not yet reflected in the account or records of the payee.
What if you do not pay the amount until a later year?
If the amount incurred to an associate is not paid until a later income year, either the following options are available:
Claim a deduction under normal income tax provisions. However, this option will no longer entitle you to claim a notional R&D deduction in the year the payment is made.
Claim a notional R&D deduction in the year you make the payment
This document is intended to provide useful information for companies considering accessing the R&D Tax Incentive. However it is not exhaustive and it is not legal or financial advice. Saving Point disclaims all liability for any loss or damages arising from the reliance on any information contained in this document. If you wish to seek legal and financial advice regarding the eligibility of your R&D activities, please contact the Saving Point Grants team.
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