Australia

Details

  • Service: Tax, R&D Incentives
  • Type: Regulatory update
  • Date: 12/02/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Scott Olding

Scott Olding
Partner, Tax

+61 2 9335 8745

scottolding@kpmg.com.au

Australian R&D for foreign companies 

by Scott Olding, R&D Incentives Specialist

Under the old Research and Development (R&D) Tax regime, it was difficult to claim R&D activities where IP generated by those activities vested offshore. This has now changed under the new R&D Tax Incentive and importantly, Australian R&D activities can be claimed where undertaken:
  • by an Australian permanent establishment (PE) on behalf of a foreign resident
  • by an Australian subsidiary on behalf of a foreign resident

 

In either case, the usual exclusions against claiming R&D activities undertaken on behalf of another entity or claiming expenditure which is not at risk in Australia do not apply. This has opened up an opportunity to claim R&D activities undertaken in Australia on behalf of a foreign resident where the PE or subsidiary does not bear the financial risk for the R&D and/or own the IP arising from the R&D.

 

This is good news for many multi-national organisations that have been outside the ambit of the Australian R&D regime in the past (for reasons including global IP ownership policies or global cost centres for R&D).

 

The interrelationship between the new R&D rules and Transfer Pricing requirements needs to be understood and coordinated. Achieving appropriate classification of the R&D technical challenges associated with the project being carried out in Australia and aligning these activities with the functional risk assigned to the Australian PE or subsidiary under Transfer Pricing principles is where KPMG can add value to our clients and targets.

 

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