To qualify for an R&D tax offset, your company’s total R&D deductions for the year must be at least $20,000. If your total deductions are less than $20,000, you can only claim the tax offset for:
- Payments made to a Research Service Provider (RSP) for services in a research area where the RSP is registered under the Industry Research and Development Act 1986, and the RSP is not connected to your company.
- Contributions made under the Co-operative Research Centre (CRC) program.
For official guidance, visit the ATO website here.
Using LodgeiT for R&D Tax
To use the R&D tax feature in LodgeiT, you first need to activate "Research & Development (R&D)" in the Manage Section
When filling out the form, make sure your R&D expenses match the amounts you reported in your R&D registration application through the R&D Portal.
- Click "Yes" to confirm you have R&D expenses and enter the correct amounts.
- If you used an R&D application service provider, they should supply these amounts.
- If you prepared the claim yourself, ensure you understand the R&D rules well because the ATO often checks claims and may reject those that are not eligible.
- To reduce risk, consider getting an advanced finding from the ATO before making your claim
After completing R&D Item 21, you will see your eligible expenses at Item D and your tax offset at Item U.
Use the "Edit" button to review or change these details.
Important Accounting Notes
R&D expenses are added back in the "Reconciliation" section, which means the tax is calculated on your income after adding back the R&D tax offset.
Usually, record the net tax refund (from the R&D offset) as a non-assessable revenue item on your balance sheet.
When to Record the Journal Entry
Record the journal entry for R&D costs on the date the expense actually belongs to. For example, if the R&D costs are for the financial year ending June 30, date the journal entry June 30 of that year. This follows ATO and accounting rules to ensure expenses are matched to the correct period.
If you record the journal entry after June 30 (for example, on July 1), it will incorrectly move the expense to the next financial year, which should be avoided.
Sample journal entry
To record tax expense and R&D tax offset for the financial year
Date: 30 June
Research & Development Expense $155,732.61
R&D Tax Offset Receivable $155,732.61 Receipt of R&D tax offset refund.
Date: (On receipt of R&D tax offset refund)
Cash (or Bank) $155,732.61
R&D Tax Offset Receivable $155,732.61