December year end R&D tax checklist | KPMG | AU

December year end R&D tax checklist

December year end R&D tax checklist

Georgia King-Siem outlines R&D activities that must be registered with AusIndustry by 31 October 2017.

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Director, R&D

KPMG Australia

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Research & Development (R&D) activities must be registered with AusIndustry within 10 months after the end of the income year. For companies with a 31 December 2016 year end, that deadline is 31 October 2017. Ideally most companies will have prepared and lodged their R&D tax claim long before this deadline, but for those that have not, there is very little time left in which to do so.

For those undertaking R&D activities at the moment, the following should be front of mind:

R&D Governance

Most companies undertaking projects that involve R&D activities keep good records; business requirements, technical specifications, design decisions, end states and project costs. Unfortunately, while these records may cover R&D activities, they often fail to articulate the legislative criteria. This results in a disjuncture between the R&D activities described in the R&D Registration application and the company’s own documentation. This can be fatal to a R&D claim and companies must ensure they have a strong R&D governance framework that seeks to identify and retain contemporaneous documentation that speaks to the R&D criteria.

Documentation

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.

Payments to associates

Under the R&D provisions, R&D expenditure incurred to an associate must 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).

Overseas activities

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.

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