End of Financial Year innovation cues

EOFY – Innovation cues

Georgia King-Siem, R&D Tax Specialist, discusses R&D issues that should be on your radar in the lead up to the end of financial year.

Director, Tax

KPMG Australia


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For most, 30 June 2016 will mark the end of the financial year (EOFY) and for those investing in innovation, there are a few issues that should be on your radar.

Investment in internal innovation

If you are claiming the Research and Development (R&D) Tax Incentive, there are three things you should consider before the end of the income year:

  • Payments to associates. Any R&D expenditure incurred to an associate during the year should be paid by 30 June if possible. Moreover, if there is any R&D expenditure incurred, but not paid to an associate in the year, care should be taken not to claim a deduction on that amount as doing so will preclude any possible future R&D benefit attaching to that amount.
  • Overseas activities. Generally overseas R&D cannot be claimed. However if you went offshore because you needed access to people, geographies and/or materials/equipment not available in Australia, you should consider an Advance Finding for Overseas R&D Activities. Unlike normal registrations, applications for Advance Findings must be lodged before the end of the year.
  • Documentation. All R&D activities and expenditure thereon require supporting contemporaneous documentation. Now is a good time to reflect on whether you have sufficient documentation to support a R&D claim for the current year.

Investment in external innovation

If you are thinking about investing in someone else’s innovation, consider whether any of the new tax breaks might apply. Two commencing 1 July 2016 are:

  • Tax breaks for angel investors. Investors in Australian early stage innovation companies (ESICs) may qualify for a 20 percent tax rebate and receive 10-year capital gains tax exemption on investments in ESICs held for more than one year.
  • Tax breaks for venture capital. Investors in new early stage venture capital limited partnerships may qualify for a 10 percent tax rebate and receive CGT exemption on exit.

While many government initiatives are on hold pending the election, the tax incentives above are not and should be part of your innovation FY2016 review and FY2017 planning.

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