Claiming overseas R&D activities under the R&D Tax Incentive
Conducting R&D activities outside Australia
To register and claim a tax offset for activities conducted overseas you must first apply for an Overseas Finding. To receive an Overseas Finding for an overseas R&D activity you must demonstrate that it meets the following 4 conditions.
1. Your overseas R&D activity must be an R&D activity
The overseas activity must meet the R&D Tax Incentive program’s requirements for being either a core R&D activity or a supporting R&D activity.
2. There must be a scientific link to an Australian core R&D activity
You need to show that:
- there is a link between your planned overseas activity and your eligible Australian core R&D activity
- you can’t complete the Australian core R&D activity without conducting the overseas activity.
3. The overseas R&D activity must not be able to be conducted in Australia or its external Territories
You must demonstrate why the activity can’t be solely conducted in Australia. There are 4 allowable reasons.
The activity:
- requires facilities, expertise or equipment which are not available in Australia
- would contravene a law relating to quarantine
- requires a population (of living things) which are not available in Australia
- requires access to geographical or geological features that are not available in Australia
Financial reasons alone are insufficient for an overseas activity to meet this condition.
4. The costs of overseas R&D activities must be less than the costs of related R&D activities undertaken solely in Australia
If the anticipated expenditure for your overseas R&D activities is greater than the anticipated expenditure on the related Australian R&D activities we'll not find them eligible.
You'll need to include what you reasonably anticipate the expenditure will be in all income years, when you apply for an Overseas Finding.
What does 'not available in Australia' mean
pdf · 0.14 MBOverseas Findings
An Overseas Finding also includes an Advance Finding about whether your overseas activities are ‘R&D activities’. This will give you certainty about the eligibility of your overseas activities. An Advance Finding is a binding decision issued by us.
In your application for an Overseas Finding you'll need to include information about each overseas activity and show how each activity meets the 4 conditions above. Following a review of your application we'll contact you with our finding(s).
You must submit your application for an Overseas Finding before the end of the income year in which you conduct, or plan to conduct, the activity. We cannot accept late applications or grant extensions of time to apply for a finding under any circumstances.
Even if you have a positive Overseas Finding, you'll still need to apply to register your R&D activities. An Overseas Finding is not a substitute for registering your R&D activities.
The finding process
When you apply, we will review the information you provide and work with you to understand your activities. We will then assess whether your activities meet the conditions for overseas R&D activities that cannot be conducted in Australia.
We may conduct background research to verify your information and contact you for more information to make a decision.
You should keep records of how:
- you self-assessed your activities
- your activities meet the conditions for being overseas R&D activities that cannot be conducted in Australia.
There are 4 possible findings we can make about your activities:
- all of your activities are eligible and meet the conditions
- your activities do not meet all of the conditions and are ineligible
- some or part of your activities are eligible
- we refuse to make a finding.
In each of these instances, we'll provide you with written notice of our decision, which includes a finding certificate about your activities. A copy of this notice and any certificates will also be provided to the Australian Tax Office (ATO).
A notice or certificate of finding is not a registration. If you get a positive Overseas Finding you'll still need apply to register your R&D activities.
The department has engaged independent contractors who may assist in assessing your overseas finding application. Your information remains secure and confidential. The department will make the final decision.
How long Overseas Findings last
An Advance Finding binds the Commissioner of Taxation for up to 3 income years from the start of the income year in which your application was made.
After that time, if you continue to want certainty about whether your activities are R&D activities you may apply for a new Advance Finding for those ongoing activities. An Advance Finding provides certainty about whether your activities are or are not R&D activities but is not required in order for you to register your R&D activities and claim a tax offset for expenditure incurred on those activities.
AusIndustry and the Australian Taxation Office (ATO) agree that an Overseas Finding applies for the duration of the activity. This means if you already hold an Overseas Finding for particular ongoing activities you need not reapply for those activities after 3 income years.
You must still apply in respect of overseas activities not covered by an Overseas Finding certificate (including where the activities have significantly changed) to claim the R&D Tax Incentive for expenditure incurred on those activities.
If you are considering making, or have made, applications to extend findings you may not need all of the additional findings applied for. If you have an assessment underway related to an extension to a previous finding, the AusIndustry officer processing your application will contact you to discuss if you should continue with all or part of the additional finding.
You cannot register and claim a tax offset for activities conducted overseas if you don’t have an Overseas Finding - if you have queries about whether an Overseas Finding is required, contact the AusIndustry officer processing your application.
If you have applied for new findings to extend your previous findings you will be contacted by AusIndustry.
If you have applied for findings for new or different activities to those covered by existing findings then you may need to continue to have your application for the new findings assessed.
Existing certificates are enough for any Overseas Findings to apply for the duration of the activity - they won’t be replaced.
The wording in certificates that relates to the ‘Income Years Commissioner is bound for each activity’ only relates to the Advance Findings listed in the document. It doesn’t relate to any Overseas Findings listed in the document. The wording will be updated in future certificates to make it clear this only applies to the Advance Findings.
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