The R&D Tax Incentive program is the Australian Government’s principal measure to enhance and increase the Australian business’s contribution to research and development activities.

The R&D Tax Incentive offsets the tax for expenditure on eligible R&D activities. It also provides tax benefits for the decline in value of depreciating assets used for eligible R&D activities.

There are some things to consider while filing R&D tax claims.

Listed below are the top 5 which desires the severe attention of the accountant:

 

Ask about R&D: A responsible accountant should make sure that he inquires about his clients (especially in the manufacturing, software, mining, health, food, and agriculture industries) eligibility to receive R&D tax benefits.

Only Companies can claim: Only a registered Australian company can make the R&D tax claim. Hence, the client can select the organizational structure of the company accordingly. It is also to be noted that there is one claim per company for every financial year. However, if multiple companies are involved joint claims can be made.

To understand how The R&D fits Into the Company Income Tax Return: All the company expenditure related to R&D activities is directly eligible for this kind of tax claim. However, there is no change in the accounting activity on a day-to-day basis.

Don’t forget Label D: The R&D expenditure amount of the company must be included in Label D. This is to make sure that there is no double deduction in the company tax return via the R&D Tax schedule.

R&D Tax Offset Cheques aren’t Assessable Income: The journal entries for them are-
Upon creating the R&D tax offset refund:

  • Cr Income tax expense
  • Dr. Provision for tax
  • When the refund comes in it is coded to the provision of tax account:
  • Dr. Bank
  • Cr Provision for tax

The accountant also has to make sure that the company income tax return is only filed once the company has received its R&D registration number.