In today’s globalised R&D environment, many Australian companies no longer limit their technological development to domestic facilities. Overseas experiments, testing, or technical validation often rely on specialised overseas facilities, expertise, or unique environments.
To accommodate cross-border R&D, the Australian R&D Tax Incentive includes an Overseas Finding mechanism. Through this process, companies can include overseas R&D activities that support Australian R&D projects within the scope of tax incentives.
This article outlines the basic concept and key eligibility criteria for Overseas Findings, helping companies understand the essential preparations before applying.
What is an Overseas R&D Findings Determination?
An Overseas Finding Determination is an official decision made by AusIndustry to assess whether a company’s overseas R&D activities meet R&D Tax Incentive requirements.
If the determination is positive, companies can include the relevant overseas R&D expenditures in their R&D Tax Incentive claims, which will be recognised by the Australian Taxation Office for tax purposes.
It is important to note that without an approved Overseas Finding, companies generally cannot include overseas R&D costs in their R&D Tax Incentive claims. For businesses engaged in cross-border R&D, this process is therefore critical.
Key Eligibility Criteria for Overseas Finding
1. Activities Must Qualify as R&D
Overseas activities must meet the standards for core or supporting R&D activities under the R&D Tax Incentive framework.
2. Scientific Link to Australian R&D
Companies must demonstrate a clear scientific link between the overseas activity and core R&D activities in Australia. In other words, overseas work must be a necessary component of completing the Australian R&D project.
3. Activities Cannot Be Fully Conducted in Australia
Companies must explain why the relevant R&D activities cannot be conducted solely within Australia. Typical reasons include:
- Unique experimental facilities or equipment available overseas
- Specialised technical expertise
- Regulatory or legal constraints
- Unique geographic or environmental conditions
4. Cost Reasonableness
The costs of conducting R&D overseas should be lower than performing the same activities in Australia.
Conclusion
Understanding the basic requirements for Overseas R&D Findings is the first step towards successfully claiming the R&D Tax Incentive.
In our next article, we will focus on the practical application process, documentation preparation, and success strategies, including insights from companies on how to efficiently obtain an Overseas Finding and ensure cross-border R&D expenditure qualifies under the R&D Tax Incentive.
If your company plans to conduct R&D overseas, reviewing these rules in advance will lay a solid foundation for the next stage of your application.