The ATO has published the first R&DTI Transparency Report covering the 2021–22 income year. The R&DTI program aims to strengthen innovation by providing tax offsets for eligible R&D activities. To promote greater transparency and voluntary compliance, a legal requirement for publication of R&D data came into effect in July 2021, following reforms to the policy and administration of the R&DTI program.

The report outlines the benefits received by R&D entities and seeks to raise public awareness on which companies benefit from the R&D Tax Incentive. It also aims to encourage voluntary compliance with the program’s requirement.

The R&DTI is one of Australia’s key programs to drive innovation, offering a tax offset to catalyse companies to engage in R&D activities they may not undertake due to the financial risks involved. This can allow companies to invest more in innovation, boosting their competitive edge while contributing to Australia’s economic growth.

Under the new legislation, the ATO is required to publish R&D data 2 years after the end of the financial year that the data relates to. The newly released transparency report offers key insights into the companies and industries leveraging the incentive to help invest in R&D activities:

• 11,545 companies claimed R&D expenditure in the 2021–22 income year, amounting to $11.2 billion in total claims.
• Small businesses represent a significant share of participants, comprising 48% of claimants.
• The industry with the highest number of claimants across all business populations is the professional, scientific, and technical services industry, accounting for 43% of claims.
• Public and multinational businesses claimed the highest expenditure, contributing $4.9 billion to the total

How SW can help

11,545 companies are included in the report, with around 850 companies excluded due to having a substituted accounting period (SAP) beginning before 1 July 2021.

If your company participated in the R&DTI program during the 2021–22 income year, your R&D claims are part of a publicly available report. The report details the names, ABNs, and total R&D expenditure.

The ATO added a notice to the R&DTI schedule informing future applicants that their data will be included in the R&DTI transparency reporting.

Please reach out to SW R&D Tax & Government Incentives team for guidance and further discussion on how this report impacts you and your business.

Contributor

Thomas Demel

The post First annual R&D Tax Incentive Transparency Report released: Key insights appeared first on SW Accountants & Advisors.

Latest update

The Technology Investment Boost and Skills and Training Boost became law on 23 June 2023.

What is it? 

Technology investment boost: The technology investment boost allows eligible small businesses to claim a bonus deduction equal to 20% of the eligible costs incurred in relation to business expenditure and depreciating assets to support the businesses’ digital operations capped at $20,000 per income year.  

Skills and training boost: The skills and training boost allows eligible small businesses to claim a bonus deduction of 20% on the eligible costs incurred for a broad range of external training provided to their employees. 

Who is it for? 

The two tax incentives apply to small business entities with an aggregated turnover of less than $50 million. 

Eligibility requirements of the expenditures  

Technology investment boost 

To be eligible for the bonus deductions, the expenditures must be incurred in relation to the businesses’ digital operations and must meet the following criteria: 

• the costs must be incurred between 29 March 2022 and 30 June 2023
• the expenditures must be deductible under another taxation law
• if the expenditure relates to a depreciating asset, then the asset must be first used or installed ready for use by 30 June 2023. 

Some examples of the expenditures that support the digital operations of the businesses include the following: 

• digital enabling items – computer and telecommunications hardware and equipment, software, internet costs and services that form and facilitate the use of computer networks
• digital media and marketing – audio and visual content that can be created, accessible or viewed on digital devices
• e-commerce – supporting digitally ordered or platform-enabled online transactions and portable payment devices, and subscriptions to cloud-based services
• cyber security – cyber security systems and monitoring services.  

Certain expenditures such as salary & wages, financing or training costs, and expenses incurred in developing in-house software are not eligible for the bonus deduction. 

Under the existing taxation law, small business entities generally deduct a depreciating asset’s cost in one income year or over its effective life.  The bonus deduction is equal to 20% of the asset’s cost regardless of the method of deduction that the entity adopts. 

Skills and training boost 

Expenditure eligible for bonus deductions under this measure will need to satisfy the following criteria.

The expenditure must be: 

• incurred between 29 March 2022 and 30 June 2024 
• for external training of the employees, either provided in-person in Australia or online (regardless of where the employee is located).  This means that in-house or on-the-job training will not qualify for the bonus deduction
• for the purpose of training where the arrangement or enrolment occurs on or after 29 March 2022
• deductible under taxation law, which means the training should be business related
• the small business entity must be charged directly or indirectly for the expenditures by a registered training provider, and the training program must also be within the scope of the provider’s registration. 

Practically this would mean that where incidental costs are incurred, they will not qualify for the bonus deduction unless it is charged by the registered training provider. 

• the registered training provider must not be the small business entity or an associate of the small business entity.  

We note that the incentive only applies to employees. It is disappointing to see that this provision does not therefore apply to training provided to: 

• non-employee business owners such as sole traders or partners in the partnership, or 
• contractors in a business. 

When can the bonus deduction be claimed in the tax returns? 

For both tax incentives, there are special rules for the entities to determine when they can claim the bonus deductions in their income tax returns. The timing when the bonus deductions can be claimed will depend on when the expenditures are incurred and the entities’ balancing date. 

How we can help 

If you would like to discuss further the eligibility requirements or how to claim the bonus deductions, please get in touch with your usual SW advisor.   

Contributors:

Rahul Sanghani, Senior Manager

Dalin Teav, Tax Consultant

The post Supporting Small Business | Technology Investment Boost and Skills & Training Boost  appeared first on SW Accountants & Advisors.