If you’ve just discovered the R&D Tax Incentive – well done, you just cleared the first hurdle. It is an excellent assistance program.
There are many, many companies out there (especially small companies) who aren’t aware of the R&D Tax Incentive, or what it can do for them, which is a real shame.
This article is primarily for readers who are new the R&D Tax Incentive (R&DTI) program, but it will also be helpful to those of you who already have some exposure to the R&D Tax Incentive.
Use a consultant?
The next issue that you need to grapple with is whether you are going to submit your own R&D Tax Incentive application, or whether you will engage an R&D Tax Incentive consultant. See Can you file my own R&D Tax Incentive application? and Using an R&D Tax Incentive consultant.
If you are going the DIY route, then you should definitely keep reading. If you are new to the R&D Tax Incentive, however, you should think long and hard about whether this really is the best approach for you.
AusIndustry publishes a wealth of information, so if you intend to submit your own application, you will need to be intimately familiar with this material (see Offset your R&D costs to help innovate and grow your business).
If you are using a consultant, then the following is still useful background information.
If you are thinking about the R&D Tax Incentive, there is probably a good reason for it – you either have or are just about to do some R&D that may be relevant to the R&DTI. The answer is invariably NOW – the earlier, the better. There is really (well almost) no such thing as too early. Any R&D Tax Incentive consultant worth their salt will welcome you discussing your R&D early on – preferably before you start.
If you are already in the middle of some R&D, don’t worry – that’s ok. At worst, you may need to put some documentation in place before it is too late – your R&DTI consultant can guide you.
If you’ve waited until after the end of the financial year (all too common), that does potentially limit your options, depending upon what documentation you have in place, but do talk to your R&DTI consultant.
How do I get started?
You can, of course, familiarise yourself with the R&D Tax Incentive (see R&D Tax Incentive – what is it?). If you are using an R&DTI consultant, this isn’t mandatory, but it is helpful. The rest of this page will assume that you are using an R&D Tax Incentive consultant.
One of the most important decisions you will make is choosing your R&DTI consultant. Tech Abstract has seen far too many applicants ‘burnt’ by a poor choice of consultant, so we feel very strongly about it. So much so, that we have written an exhaustive guide just on this subject. See Using an R&D Tax Incentive consultant.
Book an initial meeting with your chosen consultant – this has two purposes:
- Using our checklist (see How to Choose the right R&D Tax Incentive consultant) quiz your prospective consultant and see how they stack up
- Describe your R&D (at a high level), and get some initial feedback on whether your R&D is likely to be eligible.
Is the consultant asking insightful questions that show that they are following your explanation? The more empathy they are showing with technical concepts you are explaining, the more confidence you can have in their assessment of the eligibility of your R&D. If they aren’t asking questions – be worried.
Once you have engaged the (right) R&DTI consultant, you can rely on them to guide you through the application process and let you know what things need to happen and when.
So what happens next?
Your R&DTI consultant will be need to do a technical discovery on your R&D. The first objective is to determine which of your R&D activities are eligible. The next step in the application process is to register the selected R&D activities with AusIndustry by drafting and submitting an R&DTI application. That application describes the R&D activities that you are claiming so that:
- AusIndustry knows what R&D activities you are claiming
- AusIndustry can confirm that those R&D activities are eligible
This will require the consultant to collect technical information from you. See The Tech Abstract process. for details of the Tech Abstract process, but any reputable R&DTI consultant will follow a similar process.
Once your consultant has a registration number from AusIndustry for your R&D, they will prepare and submit the associated R&D Tax Schedule to the Australian Taxation office. This sets out the actual expenses that you are claiming back.
If you have the right R&D Tax Incentive consultant, everything else should fall into place. Your application will be completely compliant, and it will be readily assessable by AusIndustry.
Even a well-written and fully compliant application may be subjected to a random review – they happen. However, a well-written application may have less chance of being selected for a targeted review. If AusIndustry or the ATO do have a closer look at your application, if it is well-written and you have good supporting documentation, they should find no issues.
The caveat is that the supporting documentation (the evidence that shows you did the claimed R&D) is something that you need to take care of. Your consultant can advise you on what you need and can advise you on whether your supporting documentation is acceptable or not. Still, the consultant is not responsible for your supporting documentation. If you plan ahead, your supporting documentation should not be a significant burden.