Australian Taxation Office clarifies eligible expenses for R&D tax incentive

The Australian Taxation Office on December 23 updated guidance on expenses that may be claimed in connection with research and development (R&D) tax incentives through a ruling on the “at risk” rule and a determination on deductions subsidized by “JobKeeper” payments.

The at-risk ruling clarifies the circumstances in which the Australian Taxation Office will deny or reduce a taxpayer’s claimed R&D tax offsets because their R&D expenditures do not satisfy the at-risk rule. The ruling includes examples of when the rule applies.

The JobKeeper determination explains how the at-risk rule applies to JobKeeper payments received by a taxpayer for employees engaged in R&D activities based on business participation in a federal Covid-19 relief package. It specifies when the at-risk rule is triggered such that the taxpayer cannot notionally deduct its wage expenditures for R&D purposes due to having received a JobKeeper payment.