Georgia King-Siem and Helen Gilfedder outline the top R&D issues to consider as the end of the financial year approaches.
For most, 30 June 2017 marks the end of the financial year. In R&D tax terms, this is a good time to reflect on FY17 and start planning for FY18. For FY17, the following should be front of mind.
Under the R&D provisions, R&D expenditure incurred to an associate must also be paid before it can be claimed under Division 355. If it is claimed under any other Division this year (or any other year), then it can no longer be claimed as R&D expenditure. This means you should review your R&D expenditure to determine if any has been incurred to an associate and consider whether it can be paid before the end of the income year or whether it will be carried forward to be claimed in a future income year (when it is paid).
Generally R&D activities undertaken overseas cannot be claimed; unless you have an Advance Finding for Overseas R&D Activities from AusIndustry. An Advance Finding will only be granted if certain conditions are met and the application must be submitted before the end of the year.
Last and most importantly, R&D activities and expenditure must not only meet the legislative criteria, but you must retain sufficient contemporaneous documentation to evidence your R&D claim. The documentation should evidence the intended purpose of generating new knowledge, the outcomes that could not be known in advance of your scientific experimentation, evidence of the experiments undertaken during the year and the outcomes or conclusions drawn as a result.
Regulator review activity is heavily focused on such contemporaneous documentation, so now is a good time to review your documentation for the current year and consider what processes you have in place to collect documentation for next year’s R&D claim (if relevant).