Learn more about the R&D Tax Incentive Associates
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Who is my R&D Associate?
An associate is any individual or entity that by reason of family or business connections, may be regarded as an associate of your R&D entity.
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a partner of the primary entity or a partnership in which the primary entity is a partner;
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if a partner of the primary entity is a natural person otherwise than in the capacity of trustee - the spouse or a child of that partner;
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a trustee of a trust where the primary entity, or another entity that is an associate of the primary entity because of another paragraph of this subsection, benefits under the trust;
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another entity (in this paragraph called the controlling entity) where:
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the primary entity is sufficiently influenced by
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the controlling entity; or
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the controlling entity and another entity or entities; or
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a majority voting interest in the primary entity is held by:
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the controlling entity; or
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the controlling entity and the entities that, if the controlling entity were the primary entity, would be associates of the controlling entity because of subsection (1), because of subparagraph (i) of this paragraph, because of another paragraph of this subsection or because of subsection (3);
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another company (in this paragraph called the controlled company) where:
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the controlled company is sufficiently influenced by:
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the primary entity; or
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another entity that is an associate of the primary entity because of another paragraph of this subsection; or
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a company that is an associate of the primary entity because of another application of this paragraph; or
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two or more entities covered by the preceding sub-subparagraphs; or
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a majority voting interest in the controlled company is held by:
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the primary entity; or
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the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and the other paragraphs of this subsection; or
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the primary entity and the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and the other paragraphs of this subsection;
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any other entity that, if a third entity that is an associate of the primary entity because of paragraph (d) of this subsection were the primary entity, would be an associate of that third entity because of subsection (1), because of another paragraph of this subsection or because of subsection (3).
AUSTRALIAN TAXATION OFFICE
Find out more about eligible enitites from the Australian Taxation Office (ATO).
VISIT ATOLet's break that down a little bit...
What is sufficiently influenced by mean?
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Accustomed
- Under an obligation to act, or
- Might reasonably be expected to act, in accordance with the directions, instructions, or wishes of that third party.
Influence can be formal or informal. The communication of directions, instructions, or wishes do not have to directly communicated. They can be communicated through interposed companies, partnerships, or trusts.
What is considered a majority voting interest?
Let's work though some examples
You are the sole owner of a company with the following employees:
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Yourself
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Your spouse
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Your best friend
- A recent collegue graduate you have no personal relationship with
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Your next door neighbour
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Yourself
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Business partner 1
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Business partner 2
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Four mechanical engineers
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Two technicians
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Two administrative staff, including the wife of business partner 2
Example 3.
SELF-ASSESS YOUR ELIGIBILITY
To learn more about how to self-assess your R&D activities against the legislative requirements.
VISIT BUSINESS.GOV.AUAssociates impact on R&D
Your associate expenditures have to be separately reported on your research and development tax schedule. If you do not accurately report your carried forward associate expenditures, and claim carried forward associate costs in a future tax year, you are likely to face additional ATO scrutiny.
Tax Planning
R&D Tax Incentive Documentation
You have to maintain documentation of your R&D activities. To read more about documentation, click on the button.
DOCUMENTATIONR&D Associates Treatment
What does incurred mean?
Paid vs. Non Paid
- Contingent, pending, threatened, or expected; or
- The taxpayer is not definitively committed to completely subjected to the liability.
For example, salary and superannuation expenses are incurred when employees have performed the services for which they are being compensated for. Until the work has been performed, the cost is not incurred. The expense is expected but the company has not definitively committed to pay the cost until the services have been performed.
Paid vs. Not Paid
Associate expenditures need to be both incurred and physically paid to be included in R&D expenditures. Expenditures that are only incurred, and not paid, can be carried forward and included in the R&D expenditures in the year in which they are physically paid.
Common Pitfalls
- Not accurately reporting your associate expenditures on your R&D schedule
In the R&D schedule, there is a specific associate expenditure section that needs to be properly completed. In this section, you disclose:
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R&D expenditures to associates incurred in prior year, not paid, not claimed (carried forward)
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Current year R&D expenditures incurred to associates
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Current year R&D expenditure incurred to associates claimed under other provisions
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R&D expenditure paid to associates in the current year
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R&D expenditure incurred to associates to be carried forward
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- Claiming costs incurred but not physically paid
It can mistakenly be assumed that costs have been paid by year end when in fact, they have simply been accrued. If you do not carefully review your associate expenditures, you risk overstating your current year’s claimable R&D expenditures.
A common instance of claiming unpaid associate expenditures comes with the last quarter of superannuation costs. The last quarter of superannuation payments are due 28 July for taxpayers with a 30 June year end. It is easy to mistakenly assume the last quarter’s superannuation payments were made before year end, when in fact they were not physically paid until early July.
Downloadable R&D resources
The R&D Tax Incentive downloadable resources contain information on a range of R&D topics to help you understand the R&D program.
Industry Specific Papers
We can assess your R&D Eligibility
Get the latest R&D insights and guidance
The R&D Tax Incentive articles contain information on a range of topics to help you understand the R&D program.
R&D Tax Incentive The Most Common Mistakes in R&D Tax Incentive Application and How to Avoid them
Research and Development (R&D) Tax Incentives are a fantastic way for businesses to recoup some of their costs associated with innovation and R&D. However, navigating the R&D Tax Incentive application process can be tricky, and many companies fall into common traps that hinder their chances of securing the deserved benefits.
In this article, we'll point out some of the most common mistakes in R&D Tax Incentive applications, helping you avoid these pitfalls and optimise your chances of a successful R&D claim.
R&D Tax Incentive Claiming Overseas R&D Expenditure under the Australian R&D Tax Incentive
"Can this offshore vendor be included in my R&D claim? We spent a lot of money with them.”
This is a question that we certainly aren't foreign to hearing from clients when preparing R&D applications! Whilst a simple question, it opens a whole can of worms.
Learn more
R&D Tax Incentive R&D For Industry 4.0 | Aeronautics Case Study
Multiple technical innovations and improvements have swept through the aeronautics industry in the past few years. When combining big data analytics with real time sensors and machine monitoring equipment, businesses are enabled to make informed decisions regarding quality control, maintenance scheduling, and improved production processes.
Smart robots can access high heat and electrical areas to increase safety on the production floor while increasing the speed of production. Parts can be designed faster and require less materials, resulting in a smaller, lighter, and less expensive parts when additive manufacturing is properly implemented.
R&D Tax Incentive Industry 4.0 | Why It Matters & How You Apply R&D
Technology has transformed the day-to-day operations of society, from how we communicate to how we learn to even how we think.
As a society, we are currently wading through the next wave of the Industrial Revolution which will have far reaching impacts to how businesses and society as a whole operate in the future.
R&D Tax Incentive R&D: Should you just worry about record keeping at the end of the Financial Year?
For our final blog post for the R&D month, we focus on best practice record-keeping that ensures a successful R&D claim that will stand up to rigorous audit activity.
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R&D Tax Incentive R&D Tax Incentive: A Checklist For Registering Your R&D Activities
If the financial year for your company ended on 31 December 2022, you have until the end of this month (31 October 2023) to register your eligible R&D activities. Eligible R&D activities must be registered with AusIndustry within 10 months of the end of your income year. If you don't register your R&D activities by the upcoming deadline, you will be unable to claim the tax benefit for eligible expenditures between January 2022 and December 2022.
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R&D Tax Incentive R&D for Industry 4.0 | Agriculture Case Study
Globally, the agricultural industry is less digitalised compared to other industries. In response to new technical advancements, the agricultural industry is starting to embrace Industry 4.0 technologies, and the next phase of agricultural advancement, coined Agriculture 4.0, is underway.
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R&D Tax Incentive R&D For Industry 4.0 | Automotive Case Study
In 2019 almost 70% of automotive manufacturers had committed to ongoing smart factory initiatives, a significant increase from 43% in 2017. In the automotive industry, smart factory initiatives are the focus of many original equipment manufacturers (OEMs) and suppliers.
Smart factories harness the digital technologies associated with Industry 4.0 to generate significant improvements in productivity, quality, flexibility, and services. Smart factories are enabled with connectivity, intelligent automation, and cloud-scale data management and analytics.
R&D Tax Incentive R&D For Industry 4.0 | The State of Advanced Manufacturing Capabilities
Manufacturing employs more than 10% of the Australian workforce, contributes more than $100 billion a year to the economy, and employs more than 1.27 million people across Australia.
Innovation and investment in Industry 4.0 technologies is extremely concentrated in Australia with only 5% of manufacturing companies generating 99% of the industry’s export value.
R&D Tax Incentive R&D: We can get R&D Incentives for 'Business as usual'
Last week, we explained that merely performing experimental activities doesn’t make them eligible for an R&D tax offset – the purpose of these activities must have been to generate new knowledge. This precludes accidental “eureka” moments from being eligible, and also those ‘business-as-usual’ activities that you would be performing regardless. This week we’ll look to examine why taking a ‘business as usual’, or similarly a ‘whole-farm’ approach to your R&D claim will leave you open to negative audit activity from Austrade and the ATO.
Find out moreR&D Tax Incentive Isn't the R&D Incentive meant to reward Innovation?
Over the past year Azure Group have heard some negative sentiment about the Research and Development Tax Incentive (R&D Incentive) – you may have seen the stories about Airtasker and CBA, or heard from your peers that the scheme is getting harder to access. Being an entitlement scheme rather than a competitive one, with a cash refund of up to 43.5% of eligible R&D expenses, the attraction to industry is obvious – as is the need for the Government to manage the program’s cost.
Find out more
R&D Tax Incentive Navigating R&D Tax Incentive This Tax Time With Confidence
Businesses with a financial year ended 31 December 2022 have to lodge their application for the Research and Development (R&D) Tax Incentive by 31 October 2023 with AusIndustry. This incentive can generate significant benefits for companies.
Learn moreR&D Tax Incentive R&D For Industry 4.0 | Software Development Case Study
Data is a huge component of Industry 4.0. As a society we are constantly generating data – transactional data, machine data, social data. In 2021 alone, it is estimated that approximately 79 zettabytes (or 79 billion terabytes) of data was generated. As more and more data is generated, we have the ability to glean insights that have previously been unavailable. The ability to analyse huge datasets has historically been limited by the compute power of your on-premise infrastructure.
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R&D Tax Incentive R&D For Industry 4.0 | Medical Case Study
Technical advancements in healthcare and medical technologies are just as influenced by Industry 4.0 technologies and innovations as other industries. Major advancements in genetics, precision medicine, and diagnostics are driven, in part, by Industry 4.0.
Industry 4.0 advancements pose a challenge to existing regulations, governance systems, and traditional care models.
Learn moreGrants and Incentives Government Grants And Incentives: Which One Is Right For My Business?
Getting a Government Grant and Incentive can be a great booster to elevate your business to the next level. There are lots of Grants and Incentives out there to consider and they can make a big difference to your business. For example, Research and Development (R&D Tax Incentives) and the Export Market Development Grant (EMDG) which don’t focus on whether you’re generating a big revenue as eligibility criteria but rather focusing on your expenses so these can be a good opportunities for startup and small businesses.
Find out moreR&D Tax Incentive R&D: Testing our Product brought about new knowledge, is that Eligible?
In our last blog we made it clear that companies performing eligible R&D activities must think scientifically – that their R&D must proceed from hypothesis to experiment, observation and evaluation, and lead to logical conclusions.
The very beginning of this systematic progression of work is the planning stage, and it is the focus of this week’s blog. We will discuss the myth that a company undergoing normal product testing or quality assurance can consider this eligible for R&D incentives – even if it leads to new knowledge that would otherwise be eligible.
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R&D Tax Incentive R&D: Hypotheses are for Scientists not for Businesses
Last week we busted the popular misconception that all innovative activities are eligible for the R&D tax incentive – instead explaining that eligible activities must be experimental and that their outcome can’t be known in advance. The next hurdle to meet is that the outcome must only be able to be determined by a scientific, systematic progression of work.
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