Adding up your R&D Expenditure is the step in the R&D Tax Claim process that has the most direct impact on your final R&D Tax Cheque amount. The more that is claimed, the more a company will get back, but it is critical to get it right, otherwise you risk trouble with the ATO down the track.

Here are Five Tips to help ensure your R&D expenditure is correctly claimed at tax time:

1. R&D Expenditure can only be claimed for R&D activities that have been registered with AusIndustry. If the activity was not registered, then you can’t claim the associated expenditure. This is why it is important not to be too specific with your registered R&D activities. Refer to our website for a suggested list of R&D activities to register.

2. Expenses must have been incurred by the company in the year of income. If your accountant oks it for your Profit and Loss statement, then this is a good indication that it has been incurred.

3. Only claim wages and salary amounts that have been actually paid. Many small business owners do not always pay themselves which is great for company cashflow, but it means that you will often miss claiming these payments.

4. Don’t forget the depreciation from assets used in R&D.  Make a list of all assets that supported the R&D project including items in the office and then apportion the depreciation for the R&D v non-R&D use. 

5. Substantiate everything. The ATO treats R&D tax claims just like any other company claim for tax deductions and will happily review or audit a company to make sure everything has been correctly claimed. However as this may not occur for a year or more, then create a file to store all supporting records including timesheets, invoices, purchase orders, asset registers and trial records.

R&D SmartTax has a template to help you add up your R&D Expenditure for the 2010 financial year. This is available on the website www.smarttax.com.au. If you have any questions do not hesitate to contact us at any time: [email protected].