R&D done outside Australia can be claimed under the R&D Tax Incentive, but only with an overseas finding from AusIndustry, applied for on time. This article is for companies with testing, trials, engineering or a specialist facility overseas, and explains when a finding is needed, what it takes to get one and what happens to the spending without it.
What an overseas finding is
An overseas finding is a decision by AusIndustry that particular activities done outside Australia can be included in a company’s R&D claim. Without one, overseas spending is not claimable under the incentive, however closely it is tied to the Australian work.
The four tests
The overseas activities have to meet all four of these.
- A significant scientific link. The overseas work has to be connected to a core R&D activity done in Australia, and essential to completing it.
- It cannot be done here. Because the facilities, expertise or equipment are not available in Australia, or because it would breach a quarantine law, or needs a population of living things, or geographical or geological features, that are not available here.
- Cost is not a reason. Being cheaper overseas does not qualify, however much cheaper.
- Smaller than the Australian work. The cost of the overseas activities has to be less than the cost of the related Australian activities.
The deadline that has no exceptions
The application has to be lodged before the end of the income year in which the overseas activity is done. AusIndustry cannot accept a late application or extend the time, so overseas work that starts late in the year needs the application in before 30 June, or before the end of your income year if it is different. Miss it and that year’s overseas spending is permanently out of the claim.
A finding is not a registration. The activities still have to be registered with AusIndustry each year, within ten months of the year end, in the usual way.
Foreign-owned companies
A foreign-owned company cannot use an overseas finding. For the Australian company of an overseas group, only R&D done in Australia counts, which shapes where the group chooses to do the work. Our page on foreign-owned companies sets out the rules that apply instead.
What a good application looks like
- A clear description of the core R&D activity in Australia and the knowledge it is trying to produce.
- Exactly what will be done overseas, where, by whom and when, and why it is essential to the Australian work.
- Evidence for why it cannot be done in Australia, such as quotes or enquiries showing the facility or expertise is not available here.
- A budget showing the overseas cost below the related Australian cost.
The finding sets out the activities and the period it covers. Plan the work to fit it, because activities that drift outside what the finding describes are not covered by it.
Questions we are asked
Can R&D done overseas be claimed under the R&D Tax Incentive?
Only with an overseas finding. The AusIndustry rule is that overseas activities are claimable where they have a significant scientific link to core R&D in Australia, cannot be done in Australia for a permitted reason, and cost less than the related Australian activities.
When do I have to apply for an overseas finding?
The AusIndustry rule is that the application is lodged before the end of the income year in which the overseas activity is done. Late applications cannot be accepted and the time cannot be extended.
Can a foreign-owned company get an overseas finding?
No. A foreign-owned company cannot use an overseas finding, so only R&D activities done in Australia count towards its claim.
Is lower cost a valid reason for doing R&D overseas?
No. The rule is that being cheaper overseas is not a permitted reason, however large the saving.
Planning overseas work
If part of your program is moving offshore, the time to talk about the finding is before the work starts, not at year end. We prepare the application alongside the claim. Book a time with us.
How we can helpR&D Tax Incentive advisory Eligibility, registration with AusIndustry and the claim itself, prepared with the records a review would ask to see.
