PwC R&D Tax Incentive Update

15 May 2014

In Short

• Overseas Activities – reminder to lodge overseas finding prior to the end of the financial year for 30 June 2014 claims.
• Payments to Associates – reminder to ensure any amounts incurred to an associate are ‘paid’ prior to the end of the financial year.

Overseas R&D activities

A company can only claim expenditure on R&D activities carried out overseas, if the activities are registered and are covered by a finding that meets the following conditions:

1. The overseas activity has a significant scientific link to ‘Australian core activities’.
2. The overseas activity cannot be conducted within Australia for a reason listed in the legislation.
3. The expenditure on the overseas activity and certain other overseas activities is less than the expenditure on the related core R&D activities and supporting R&D activities conducted in Australia.

The overseas finding application must be lodged prior to end of the first financial year to which it will apply.

Accordingly, for activities carried out in the financial year ending June 2014, an application must be lodged by 30 June 2014. Please contact us if you believe you may have qualifying activities and wish to consider this further.

Payments to Associates

Provided you meet the respective eligibility requirements, claimants may include expenditure amounts incurred to an associate in their R&D claim. However the notional deduction can only be claimed when the expenditure is ‘paid’.

Where an amount is not ‘paid’ until a later income year a claimant will have to either forgo the notional R&D deduction if the amount is claimed as a standard deduction or the notional deduction must be deferred until the year in which the payment is made. ‘Paid’ in relation to R&D claim has its general legal meaning in the income tax law which includes constructive payment.

Therefore any claimant who is looking to include a payment to their associate within their R&D claim will need to ensure these amounts are paid prior to 30 June 2014.

For further information, please contact your usual PwC adviser or:

Charmaine Chalmers
Brisbane National R&D leader
[email protected]
(07) 3257 8896

Marcus Tierney
Melbourne
[email protected]
(03) 8603 4358

Sandra Mason
Sydney
[email protected]
(02) 8266 0470

Garry Waugh
Adelaide
[email protected]
(07) 3257 8694

Ross Thorpe
Perth
[email protected]
(08) 9238 3117