Article
Australia offers refundable R&D tax incentive
April 6, 2022 · Authored by Jeff Driesen, Sid Paruthi, Alex Zinzopoulos of William Buck
U.S. biotechnology organizations that conduct R&D activities in Australia may be eligible for the Research and Development Tax Incentive (RDTI), which could provide significant benefits to an organization including increased cash to reinvest into the business and more.
The RDTI, which is jointly administered by AusIndustry and the Australian Taxation Office, plays a key role in driving biotechnology innovation in Australia. This program provides organizations in the biotechnology sector access to researchers, health professionals, and world-class research facilities.
Details of the RDTI
The RDTI is a tax credit received upon filing of an Australian company tax return to offset expenses and allow organizations to reinvest more capital in themselves.
The Australian R&D tax incentive includes a:
- 43.5% refundable tax credit for companies with an aggregated turnover of less than AUD $20 million
- 38.5% nonrefundable tax credit for companies with an aggregated turnover of at least AUD $20 million
The refundable tax offset isn’t dependent on the company having an income tax liability for the year. If the company doesn’t have tax liability, the tax offset is refundable in cash.
The incentive can then be put back into funding further clinical trials and research in Australia, resulting in a cycle which can significantly increase the scope of the trials in a way not otherwise possible in many other jurisdictions.
What are components of R&D activities?
There are two types of R&D activities that could be eligible for the RDTI: core and supporting.
Core activities
The RDTI requires the taxpayer to conduct at least one core activity during the income year, which has three key elements:
- New technical knowledge. The activity is carried out for the purpose of generating new knowledge in the form of new or improved materials, products, devices, processes, or services.
- Technical uncertainty. The outcome of the activity can’t be known based on current knowledge, information, or expertise.
Related sections
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.