File your own R&D Tax Incentive application? Yes, you can, but should you submit your own application? Probably not, but please read this article before you decide to make that commitment. At least you will have a better idea of what you are signing up for.
You are responsible for your application
Whether you submit your own application or use an R&D Tax Incentive consultant to submit your application for you, you are still responsible for the content of the application and the eligibility of the claimed R&D activities. The difference is that you have a better chance of the application being correct (and compliant) if you use a professional. If you are unaware as to why this is so important, please read AusIndustry reviews.
Applying for the R&D Tax Incentive is a two-stage process:
- You register your R&D activity with AusIndustry, who will assess the eligibility of your R&D activities from a technical perspective.
- Once you have a registration number from AusIndustry, you may then submit a separate R&D Tax Schedule to the Australia Taxation Office to claim your tax refund or tax credit.
Both applications are a fixed format, but knowledge and experience (or a lot of homework) are still needed to complete these applications correctly and well
The AusIndustry application
AusIndustry publishes extensive guidance on what R&D activities are eligible under the R&D Tax Incentive – see Offset your R&D costs to help innovate and grow your business.
However, it is still tricky to get the scope of the claimed R&D correct, as the AusIndustry guidance is somewhat generic in nature, despite much work by AusIndustry to make the advice clear and useful.
You will not find a precise definition of eligible R&D. This is because the legislation which defines the eligibility criteria for the R&D Tax Incentive is quite vague and hence open to interpretation – see R&D Tax Incentive Legislation. That, in turn, is partly because it is just difficult to pin down what R&D actually is. Having said that, the definition of R&D that is used in the R&D Tax Incentive is somewhat counter-intuitive to many who do work in R&D, as it is based on the principles of scientific experimentation. See What is an R&D Tax Incentive experiment?
As a result, it is all too easy for newcomers to the R&D Tax Incentive to (unintentionally) misinterpret (or even deliberately stretch) the AusIndustry guidance in ways that are not valid.
So, like it or not, applying for the R&D Tax Incentive is a matter of mapping your R&D activities onto the R&D Tax Incentive definition of R&D, and demonstrating how your R&D complies with the requirements published by AusIndustry. Note that distinction – it is not enough that you are compliant; you have to make it obvious that you are.
So, why use an R&D tax Incentive consultant?
Well, the question is –
- Is it easier for you to understand the AusIndustry requirements and be able to explain your R&D eligibility? Or,
- Is it easier for an R&D Tax Incentive specialist (who understands the R&D Tax Incentive program inside out) to understand enough about your R&D to explain how your R&D is eligible for the R&D Tax Incentive?
In principle, it is much easier for an R&D Tax Incentive consultant to understand enough about your R&D to write a compliant application, than it is for you to bend your mind around the requirements of the R&D Tax Incentive. The thing to remember is that an AusIndustry reviewer is more concerned with establishing the compliance of your R&D Tax Incentive application than they are with understanding your R&D.
However, the context of your R&D still matters, as it just isn’t possible to show compliance without putting your R&D into the appropriate conceptual framework. Being able to capture that context in a readily understandable written explanation is a skill that a good R&D Tax Incentive consultant should have – see How to choose the right R&D Tax Incentive consultant.
It can be difficult for applicants to write their own AusIndustry application as they are usually just too close to their own R&D.
If you are determined to draft your AusIndustry application, please read the ‘R&D Tax Incentive – guide to interpretation’ from AusIndustry. There are also many blog articles and an FAQ on this website that should be helpful in understanding many of the concepts in the R&D Tax Incentive.
To find out what an R&D Tax Incentive consultant can do for you, read Using an R&D Tax Incentive consultant.
ATO R&D Tax Schedule
You will need the support of your company accountant to prepare the R&D Tax Schedule that you need to submit to the Australian Taxation Office. Either you or your accountant will also need to be knowledgeable in the R&D Tax Incentive (ATO) rules regarding the R&D expenses you can claim – this is a different problem to knowing what goes into your company tax return, so may not be within the capabilities of your accountant.
An R&D Tax Incentive consultant will still need to rely on the financial information provided by your accountant – they just know how to interpret those accounts for the R&D Tax Incentive.
Your company accountant will need the R&D Tax Schedule before they can prepare your company tax return.
To find out what expenses you can claim, please visit the ATO web page – Checklist for claiming the R&D tax incentive.