The R&D Start Grant program allows salary on-costs and employee administrative overheads to be calculated as 30% of an employee’s total remuneration package. Can I use this method as a basis for calculating my ‘research and development expenditure’ u

No. The 30% method does not provide the degree of accuracy required for the purposes of the Income Tax Assessment Act. Income Tax Ruling IT 2552 sets out the Tax Office view on dealing with the practical problems encountered by companies in apportioning administrative and overhead costs to R&D activities, as part of the calculation of ‘research and development expenditure’ under the R&D Tax Concession.

Where it is impractical to examine and determine the R&D component of each such expense the ruling advises that it would be open to companies to apportion the expense on some basis which can be shown to allocate expenses to R&D activities with a reasonable degree of accuracy. Methods which maybe appropriate for the purpose are set out in paragraphs 19 and 20 of the Ruling.