GOVERMENT GRANT AND R&D TAX INCENTIVE - A CLAWBACK ADJUSTMENT

A clawback adjustment applies if you receive – or are entitled to receive – a government recoupment (such as a grant or reimbursement) for eligible research and development (R&D) expenditure and you have claimed the R&D tax incentive tax offset for this eligible R&D expenditure.

A clawback does not decrease or offset the grant  you receive; rather, it increases the income tax you are liable to pay on the recoupment. This income tax increase is called a ‘clawback adjustment’.

How to determine if a Clawback Adjustment apply?

If you answer “Yes” to the three following questions it is likely a Clawback Adjustment apply. If you answer “No” to any of these questions, it is likely a Clawback Adjustment do not apply.

1.       Have you received or are you entitled to receive a recoupment during the income year?

2.       Is the recoupment from an Australian government agency or a state or territory body?

3.       Have you or a related entity, claimed the R&D tax incentive tax offset for expenditure that relates to the recoupment?

A Clawback adjustment arises if, during an income year, you either receive or are entitled to receive a recoupment from an Australian government agency, or a state or territory body and all the following apply:

–          The recoupment (such as reimbursement) relates to expenditure incurred on certain activities or the recoupment (such as a grant) requires expenditures to either be or have been incurred on certain activities.

–          You have claimed the R&D Tax Incentive in relation to the expenditure (or decline in value of notional deductions where the expenditure was for a depreciating asset used in those activities).

Feel free to contact us anytime or request your free initial consultation if you would like to discuss activities and expenditures eligibility, maximisation, and calculation, or for a review of your application before lodgement, or assistance to prepare and lodge your application.