Companies that operate in the field of Information and Communication Technology (ICT) can take advantage of the R&D Tax Incentive to boost its cashflow and development capabilities. Depending on the company's revenue levels, a 45% refundable or a 40% non-refundable tax offset would apply. The key issue to determine is whether the projects undertaken by the company qualify as eligible R&D activities.
According to the program rules, core R&D activities are those whose outcome cannot be known 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 experiment, 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).
Some activities that do not meet the above criteria can also be claimed if they support core R&D in a direct way.
R&D ICT Case Studies
AusIndustry, in conjuction with the ATO, have released guidance material for the ICT sector that includes case studies relating to the following type of developments: new algorithm to analyse large data sets; cloud computing in a manufacturing environment; software modules for hand consumer devices; mobile communications systems. The details of the R&D case studies can be found on the AusIndustry website here. This is not an exhaustive list and other projects that meet the criteria would also be eligible.
Costs that can be claimed as part of the R&D Tax Incentive claim for ICT projects can include:
- Salaries, on-costs and overheads;
- Australian based consultants, contractors and other researchers;
- Depreciation and lease of assets used in R&D.
In some limited cases, R&D activities conducted by the company overseas can be claimed as well; however advanced finding application needs to be submitted to AusIndustry prior to undertaking the activity and the company needs to demonstrate that it is unable to conduct the activity in Australia.
To apply for the R&D Tax Incentive, companies need to register with AusIndustry within ten months of the end of financial year. For companies with a financial year ending 30 June 2012 need to submit their application prior to 30 April 2013.
Please feel free to contact our specialist R&D Tax consultant to determine if your company is eligible to apply. You may also contact our office on 03 9555 3511 for an obligation free consultation.