As certified tax consultants, GrantReady closely monitors court decisions that affect the major programs we assist our clients in accessing. This approach means you can trust us to give you the best R&D and EMDG outcome for your business.
Court Ruling
A recent court case (T.D.S. Biz Pty Ltd v Commissioner of Taxation [2023]) has clarified the rules for claiming Research and Development Tax Incentive (RDTI) related to overseas activities. The case involved a company called TDS, which was working on creating an electric tricycle through research and development (R&D) efforts in 2014. They bought parts from other countries for their prototype. TDS believed that buying these foreign parts for their prototype, which was solely intended for work done in Australia, shouldn’t count as an R&D activity for the purposes of the RDTI program.
Claims Rejected
However, the Federal Court disagreed and supported the Tax Commissioner’s decision to reject TDS’ claim. The court ruled that buying components from overseas can indeed be considered a supporting R&D activity. Since this purchase was made overseas without meeting the conditions for an overseas finding, it couldn’t be claimed as part of the RDTI program.
Overseas Finding Required
To claim RDTI benefits for R&D activities conducted outside of Australia, a company must get an overseas finding approved before starting the activity. This finding needs to be submitted before the end of the financial year in which the company plans to claim expenses for the overseas R&D. To qualify for the overseas finding, specific requirements must be met, including proving that the R&D activity cannot be carried out in Australia or its external territories.
Avoid a Court Case
The outcome of the TDS case serves as a reminder for companies to seek advice early on to determine if their planned overseas expenses can be included in their RDTI claim. It also serves as a reminder to go with a reputable R&D Consultant who you can trust to bring you the best R&D outcome.
GrantReady has provided clients with high quality R&D consulting services for more than two decades and continues to do so. If you are already a client of GrantReady and have questions, please get in touch.
If you are not yet a client and would like to find out more about R&D please go to our website grantguru.com.au or call 03 9853 9853.