R&D Tax Facts – October 2024

Our R&D Tax Facts is a summary over the previous quarter of developments in the world of the R&D Tax Incentive (R&DTI) program. Detailed information can also be found on the Insights section of our website.

Important deadline reminder

Eligible R&D activities undertaken by December year end businesses between 1 January and 31 December 2023 need to be registered with AusIndustry by no later than Thursday 31 October 2024. Registration of R&D activities is a vital step in the process required to access an R&D tax offset via your annual tax return.

Compliance environment

In recent months, we’ve seen a noticeable increase in the level of review activity related to the R&D Tax Incentive. The ATO has shifted its approach, moving away from a less active stance seen during the COVID era.

We are also seeing the ATO hold up larger refunds while requesting additional clarifications to confirm eligibility, particularly focusing on areas like aggregated turnover and evidence of expenses incurred.

AusIndustry remains active particularly in the area of software claims, but continues to adopt a more collaborative approach, offering guidance and opportunities to correct potential errors before initiating formal reviews. This approach allows companies to address issues early, maintaining a constructive pathway to compliance.

R&D Tax Transparency report

In October, the ATO published its first R&D tax transparency report, covering the income year ending 30 June 2022. The report lists the name of the R&D entity, ABN or ACN, and the entity's total expenditure on R&D, with some additional analysis on the ATO's official website. The initiative aims to enhance transparency, shed light on the benefits derived by companies, and encourage voluntary compliance with the R&D program.

Latest AusIndustry R&DTI updates

Two recent updates to R&DTI content on the AusIndustry website are: 

(1)    Hypothetical machine learning case study released

AusIndustry has published a case study showing how entities using machine learning techniques can assess their activities for the R&DTI program. This is part of a broader suite of guidance updates around the software development industry and R&DTI program, and consistent with broader compliance trends in this area.

(2)    Application processing timeframes

New information on application processing timeframes has been added, covering both performance measures and factors that may impact processing times. For planning purposes, it’s important to note that potential processing times increase significantly from 20 to 80 business days, if submitted more than 6 months after the end of a company’s income period (i.e. after 31 December 2024 for YE 30 June 2024 companies). These are, however, in terms of AusIndustry performance measures and we do see significantly quicker processing times in practice. 

Grants landscape update 

With the upcoming Queensland State Government election, the State Government is currently in Caretaker mode. This means that state grants, including Made in Queensland (Round 7) and the Manufacturing Hubs program (Round 4), are currently on hold. We are recommending that clients wait for the election dust to settle before pursuing state grants again in earnest.

On the positive side, there are some great Federal programs currently open or opening soon, including: 

• The revamped and expanded EMDG program, which opens on 12 November. This is a ‘first-come first served’ allocation program, which will see funds exhausted quickly.

• The Industry Growth Program, which provides SMEs with access to expert advice and matched grant funding (from $50,000 to $5mill) for commercialisation of ideas, is currently open.

• Upcoming Grant Opportunities from the Medical Research Future Fund (MRFF), which is a cornerstone of health and medical research funding in Australia, providing significant opportunities for researchers and companies to advance their work and contribute to public health. 

Visit our Insights Portal, for further information on grant funding and the importance of staying grant ready.

Please contact us if you’re keen to learn more or if you require assistance.