Applications for registration of R&D activities due 30 April 2025
Applications for registration of R&D activities due 30 April 2025
An important reminder that the deadline to lodge an R&D claim for the year ended 30 June 2024 is fast approaching, with applications for the registration of R&D activities due by 30 April 2025.
If you’d like to explore how BDO can help with your claim, please refer to the R&D and Government Incentives team with the contact details below.
Planning for 30 June 2025 R&D claims
The end of the 2025 financial year is fast approaching. As you prepare for your end of year activities, here are some key considerations when it comes to R&D activities:
R&D documentation
Make sure your R&D documentation is thorough and up to date. Whilst recent case law has affirmed that specific supporting documentation is not a legislative requirement, it is highly beneficial in substantiating your claims and demonstrating compliance with the legislative criteria.
Are you claiming in the correct entity?
In late 2023, the Australian Tax Office (ATO) released Taxpayer Alert 2023/4 Research and development activities delivered by associated entities.
The ATO’s current focus revolves around claims made by R&D entities for expenditure incurred under an agreement with an associate of the R&D entity (the ‘Service Provider’) who itself conducts the R&D activities.
In particular, the ATO is concerned with arrangements that:
- Incorrectly purport the R&D entity as having incurred or paid (or both) the relevant expenditure under an agreement with the Service Provider; or
- Have the effect of obtaining for the R&D entity a tax offset for expenditure on R&D activities purportedly conducted for the R&D entity's own benefit but are instead in substance being conducted for (or to a significant extent, for) the Service Provider.
While it is common and usually prudent to separate the Intellectual Property (IP) from the trading activities of a business, this can cause complexity where the entities are not consolidated for income tax. For example, the ATO has identified concerns when all income and expenses are initially recognised in the trading entity and subsequently recharged to the IP entity (the claimant R&D entity). This is typically justified on the basis that the R&D activities are conducted for the IP entity, despite there being no commercial arrangement in place for the IP entity to exploit the benefits of the R&D results. Even where there are commercial arrangements entered into by the relevant parties, the ATO is concerned where the legal agreements appear to be inconsistent with the actual commercial substance of the arrangement.
Payments to associates
Further to the above, if you are looking to include payments to associates in your claim, you will need to demonstrate that these amounts were in fact paid prior to 30 June and not just incurred. Payment can include constructive payments, for example, through the offsetting of a loan where there are mutual obligations between the parties and the loan is documented and reflect appropriate commercial terms. As this is a key focus area of the ATO, we recommend seeking advice if you have payments to associates.
Advance and Overseas Findings
Consider whether you would like to lodge an Advance or Overseas finding.
Criteria for Overseas Finding
If you are looking to claim any overseas expenditure in 2025 it must be covered by an Advance Overseas finding.
In order to receive an Advance Overseas Finding, you must apply to DISR (AusIndustry) by 30 June 2025 and be able to demonstrate that:
- The overseas activity was unable to be conducted within Australia
- The activity has a significant scientific link to one or more core R&D activities conducted solely in Australia, and
- Over the life of the activities, you will spend more in Australia than overseas.
Overseas Findings are valid for the life of the activity provided the activities do not materially change from those described in the finding certificate.
Benefits of an Advance Finding
Advance Findings, whilst not a requirement of the program, can provide certainty about the eligibility of your R&D activities.
Findings are binding on the Commissioner of Taxation and can assist in planning and budgeting for future R&D projects. They can also help to secure funding and investment by demonstrating government support for your R&D activities.
How BDO can help
Our R&D & Government Incentives team has significant experience assisting in the preparation of R&D tax incentive claims. Contact us for advice in relation to your application.