Part 2: Claiming The R&D Tax Offset

Nathalie jones valiant finance

Nathalie Jones

Wednesday, 29 June 2016

Claiming the 45% tax offset from your R&D activities is relatively easy. If you read our previous post and you think you’re eligible, this quick guide will help you through the process of actually applying.

Remind me: what’s the threshold?

Your company’s earnings must be less than $20 million per annum, and you need to be developing ‘new knowledge’. Check out Part 1 for more on this.

How do I apply to claim my 45% tax offset?

Stage 1: Ask yourself these questions:

Do I fulfil the main eligibility requirements? Have I registered my activities with AusIndustry? For your R&D tax credit you must register within 10 months, and before your income tax return. Do your claimed expenses qualify? To claim the full R&D tax offset your claimed expenses should be greater than $20,000 otherwise claiming the offset could become slightly more difficult.

What counts as a ‘claimed expense’?

A claimed expense (technically known as a ‘notional deduction’) is incurred when you’re undertaking your R&D activities. These include:

  • Expenditures incurred during R&D
  • Depreciation incurred during your R&D
  • Adjustments to the assets used for R&D

Stage 2:  Is your business controlled by an entity that does not pay income tax?

If your company is controlled by any other companies that do not have to pay income tax (such as a charity), then you may not be able to claim the 45% tax credit.

Note: if you are controlled by a tax exempt company then you may still be able to get a 40% tax credit, so it’s best to check with your accountant or business adviser.

Stage 3: Calculate your tax offset

This is where you claim how much your tax credit will be, and it’s really simple: multiply the total of the deductions by 0.45 (i.e. 45%). For example, Company XYZ is an R&D entity that has undertaken $1,000,000 worth of R&D activities. Company XYZ’s total turnover is $1,500,000 and the company is not controlled by any tax exempt companies. Therefore, Company XYZ is able to claim the 45% tax credit of $450,000.

Stage 4: Lodge your tax credit claim

Once you are able to claim that you’re eligible for the tax credit, you then have to lodge a claim with the Australian Tax Office.

Lodging your tax credit claim will involve keeping records of your expenses; these records will involve documents on how you apportioned expenses between core and supporting R&D activities, and those which were not considered R&D activities. Specific documents you will need include; reports that describe the R&D activities you carried out, who conducted them and the time spent on them. Keep in mind that these records are usually kept for 5 years, so it may be a good idea to recruit an accountant or consultant to assist you with keeping these records intact.

What’s the next step?

The R&D tax credit is quite a cost effective way to further invest in your business. You could invest in things that will increase the value of your business, such as developing proprietary technology to improve efficiency and increase revenue.

Investing in research and development empowers your business to adapt to the future needs of your customers and gain an edge over your competitors, based on the simple fact that if you don’t move forward — you will simply be left behind.


Nat is the Communications Manager at Valiant Finance. She has a double degree in Journalism and Law, and a background in the fintech space, hailing from Asia's largest fintech hub, Stone & Chalk.

Related Posts

Case Study: Mark’s Wholesale Steel Business

Finding the right business loan doesn’t have to be difficult. See how we helped Mark’s Wholesale Steel Business find the right business loan for them.

Take Your SMB Marketing Strategy To The Next Level in 2018

How do you attract new customers to your business? Where do loyal customers come from? It all starts with your SMB online strategy.

Making The Leap: Transitioning from PT to Gym Owner

The path from personal trainer to business owner can be both challenging and rewarding. Check out our top tips for making the transition.

How To Get Your Business Set-up on Social Media

Want to reach your customers online? Are you ready to digitise your small business? First up: get smart about social.

How To Handle Complaints With The Service Recovery Paradox

Don't let angry customers stay angry. Protect your business' reputation with these simple tips and tricks for delivering exemplary customer service.

How To Find The Right Loan For Your Small Business

Every business is unique. Every business loan is different. What features are most important to you? Consider these 4 things before applying for finance.

Ready To Take Your Business Global?

Have you explored your trade finance options? Premiering your business on the world stage may be within reach.

Don't Get Caught Out: Top Tips For Smart Inventory Management

Your guide to smart inventory management for every season.

3 Great Ways to Drive Sales Through Customer Loyalty

Get more customers and keep them. Here's the low-down on setting up your very own customer loyalty program.

How To Compare Business Loans Across The Market

You've explored your business finance options. What do you do next? How can you be sure you're comparing loans effectively and getting the best deal?

How To Make Great Hiring Decisions For Your Small Business

Want to expand your team but don't know where to start? Here's our guide to hiring great employees, featuring tips from industry leaders.

How To Develop Your Unique Selling Proposition

A Unique Selling Proposition (USP) is fundamental for any business looking to grow. Learn how to develop your USP and stand out from the crowd.

Could Debtor Finance Solve Your Cash Flow Concerns?

Are you invoicing your B2B customers with longer payment terms? Is it hurting your cash flow? Debtor finance could be a lifesaver between payments.

Here's What Working Capital Can Do For Your Business

With so many business finance options to choose from, how do you know whether working capital is right for your business? Start by reading this.

7 Tips For Managing Business Debt

2018 is your year. Here are 7 quick tips and tricks to get back in the driver's seat when it comes to battling business debt.

Time To Refinance? Here's What You Need To Know

Are you ready to refinance? Reviewing your business loan every 2 - 3 years can save your SME a lot of money. Here's what you need to know.

19 Business Funding Mistakes To Avoid

Improve your chances of locking down the perfect business loan. Here are 19 business funding mistakes to avoid when you're applying for commercial finance.

12 Business Set-Up Costs You Need To Know About

Setting up a business is hard enough, without getting stung with unexpected costs. Here are the things you should be thinking about before you dive in.

5 Must-Ask Questions When Applying For A Small Business Loan

Getting the best rate is all about asking the right questions. Have you done your research? Here's where to start and why.

Part 2: Claiming The R&D Tax Offset

"Ok, I'm eligible for the R&D tax incentive. But how do I actually claim it?" Here's what you need to know.

Part 1: Are You Eligible For The R&D Tax Incentive?

You could be missing out on a tax offset of 45 cents in every dollar. Check your eligibility for the R&D tax incentive today.

Debt or Equity: What's best for your business?

Need to raise cash for your business? We explore the use of debt versus equity, and how to decide which one is best for your business.

Are The Rewards On Your Business Credit Card Worth The Higher Fees?

Reward points can add value to your business, but it's not one-size-fits all. Here's what you need to know.

Company v Sole Trader: What's The Verdict?

Here's the million dollar question: will you start up a company or will you establish yourself as a sole trader? Get the full story.

10 Lessons We Learned From Starting Our Small Business

Valiant Finance is a small business dedicated to supercharging the growth of other small businesses through access to funding. Here's what we've learned.