EOFY Reminders: R&D Tax Considerations Before 30 June 2023

EOFY Reminders

As the 30th of June 2023 draws near, it is important to bring some requirements of the Research & Development Tax Incentive (R&DTI) to the attention of participating innovating Australian businesses.

Key considerations for the 2023 EOFY include:

  • Payments to Associates
  • Temporary Full Expensing
  • Overseas Activities
  • Record Keeping

Payments to Associates

To claim R&D expenditure as a notional deduction in eligible FY23 activities, it is vital to pay any expenses to associates before June 30, 2023. Unpaid amounts can be carried forward but will not be refundable in the 2023 Company Tax Return.

To ensure that expenditure incurred to associates for R&D activities can be included in the 2023 Company Tax Return, the R&D entity should make cash payment of the expense incurred to the associate prior to June 30.

If payments need to be made, we recommend doing so at least a few days before the end of the year in case there are any delays in payment processing.

Temporary Full Expensing

Temporary Full Expensing (TFE) was implemented in 2020 to encourage investment during the pandemic and will expire on June 30, 2023.

Assets that have been deducted through TFE can still be claimed under the R&D Tax Incentive, to the extent that they’re used for R&D activities.

If you wish to claim TFE for capital purchases in the 2022-23 income year, asset delivery and installation must be completed before June 30, 2023.

Overseas Activities

Ordinarily, expenditure incurred on overseas activities is ineligible for deduction under the R&DTI. To claim overseas expenditure under the R&DTI for FY23, an Advance/Overseas Finding must be submitted by June 30, 2023, explaining the need to conduct the activity abroad. The four permitted reasons for overseas activities include:

  1. Access to facilities or expertise not available in Australia
  2. Access to a population not available in Australia
  3. Activities that would breach the Biosecurity Act 2015
  4. Access to a geological characteristic not available in Australia

Record Keeping

R&DTI claimants must retain contemporaneous documentation to validate the registered activities were carried out, and show the costs claimed were associated with those activities.

As the financial year concludes, it’s a prime time to collect the documents generated throughout the year’s R&D activities, ensuring solid substantiation for present and future applications.

Now is a great time to take stock of the year that was and identify opportunities to improve record-keeping practices moving forward.

If you would like to discuss any of the above issues or anything else R&D Tax related, please contact our expert R&D Tax Consultants for a consultation.

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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech & online companies.

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