EOFY R&D Tax Incentive Considerations
With State of Origin upon us (go Maroons!) and hot summer days a distant memory, it can only mean one thing. It’s almost 30 June people!
Yes, the end of the financial year is once again here, all too soon, and it brings with it some important considerations if you’re planning to lodge an FY24 R&D Tax Incentive claim. We’ve summarised some key things you need to be across.
Payments to associates
R&D expenditure that is incurred to an associate can only be claimed for R&D tax purposes to the extent that these costs are physically or actually paid as at 30 June 2024. As such, it’s important to ensure that costs incurred to associates are actually paid prior to EOFY if you intend to include these amounts in your upcoming FY24 R&D tax claim.
In broad terms, associates are those individuals or businesses that, because of family or business connections, might appropriately be regarded as being associates.
Overseas R&D activities
Expenditure on overseas R&D activities can only be claimed in specific circumstances. Most critically, to claim any eligible overseas R&D activities in FY24, an Advance/Overseas R&D Finding needs to be prepared and lodged by the end of your income year (typically 30 June 2024). Failure to prepare and lodge an Advance/Overseas R&D Finding prior to 30 June will prevent you from including eligible expenditure on overseas R&D activities.
Documentation
It’s important ensure that your documentation is in good order for substantiating any major FY24 R&D activities. Contemporaneous records (i.e. records prepared and collated in preparation for and as R&D activities are being undertaken) should be in place and easily accessible at the completion of FY24 to provide evidence for an upcoming R&D tax claim.
We can provide customised R&D documentation recommendations and are conducting documentation workshops with clients to ensure they continue to be able to meet the expectations of regulators when it comes to evidencing their annual R&D activities and costs.
Recent ATO alerts
Consider recent taxpayer alerts (see: 'Tis the Season for Scrutiny – Two new R&D Taxpayer Alerts from the ATO’ ) and whether your arrangements meet these guidelines. It's essential to stay informed about the latest ATO alerts that might affect your R&D claim to ensure compliance, whilst also maximising your R&D tax benefit.
Prepaid expenses
Review the rules around prepaid expenses to determine if they can be included in your R&D claim. Prepaying certain expenses before 30 June might be beneficial, but it's important to understand the specific requirements and limitations that apply.
Contact your friendly neighbourhood R&D tax advisers at Intellect Labs if you need help prior to 30 June, or if you’re keen to put together an FY24 claim early in the new financial year.