R&D activities conducted overseas for the benefit of an Australian Company may be eligible for the R&D Tax Incentive however special rules apply where the R&D expenses are incurred outside of Australia. Prior to claiming overseas R&D costs incurred in the current year, companies with a 30 June year end much first apply to Innovation Australia for an Overseas Finding prior to the end of financial year.
To achieve a favourable Overseas Finding, there are four conditions to be met for R&D activities conducted overseas to be eligible under the R&D Tax Incentive.
Condition 1: The overseas activity must be covered by an advance finding that the activity in question is an eligible R&D activity.
Condition 2: There must be a ‘significant scientific link’ to the core R&D activities conducted in Australia which are registered or likely to be registered in an R&D Plan.
Condition 3: The R&D activity cannot be conducted in Australia for conditions consistent with R&D Tax Legislation, such as it requires a facility, expertise or equipment not available in Australia, contravenes quarantine laws, requires access to a population greater than Australia or requires geographical or geological features not available in Australia.
Condition 4: The total amount reasonably anticipated to be spent on eligible R&D expenditure in Australia is in excess of the total amount reasonably anticipated to be spent on eligible R&D expenditure overseas.
The resulting Overseas Finding is a binding decision providing the company with certainty about claiming the approved overseas R&D costs.
It is advisable to seek professional assistance with exploring the suitability of making an Overseas Finding application. Overseas R&D activity conducted in the current financial year will require an Overseas Finding to be submitted by June 30 to be eligible to claim an R&D Tax Incentive in the company Tax Return lodged after financial year end. Please contact your usual Hanrick Curran Advisor or contact Jamie Towers on 07 3218 3900 for assistance in considering an Overseas Finding application.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.