The Industry department has opened consultations on updated guidelines for software claims under the research and development tax incentive, after the federal government opted not to introduce a new separate scheme for the sector.
The update comes just two years after new guidelines for research and development tax incentive (RDTI) software claims were unveiled by the government.
The guide aims to provide plain English clarification of what sort of software projects qualify for the RDTI, and what records need to be kept by companies.
The department has released a draft version of the guidelines and is now accepting submissions on it for the next three weeks until 18 June.
Fitting software development within the RDTI has been a continual bugbear for the tech sector for several years, leading for many prominent industry groups and companies to call for an entirely new scheme just for these claims.
But the government opted not to do this in this month’s federal budget, and the new guidelines do not amount to any legislative changes or changes to the way the scheme operates.
The new 16-page guide to making software claims detail the steps a company needs to go through to determine whether they qualify for the scheme, including that the outcome of the software development cannot be known or determined in advance.
The applicant is expected to have evidence they have searched worldwide for an existing way to reach the desired outcome before the R&D is conducted, and this can be through searching Computer Science Journals, major open source code repositories such as GitHub and tech blogs.
The guide also details how a company must demonstrate a systematic progression of work based on principles of established science and keep records to show, including the initial hypothesis, the experiment being conducted and the conclusions.
As with previous guides and decisions, software development for internal business administration such as system testing, requirements testing, data mapping, tech upgrades and data manipulation are not eligible for the RDTI.
“To determine your dominant purpose to develop, modify or customise computer software, you need to consider all the purposes you have to conduct that activity. You then need to consider the strength of each purpose and how important each is compared to your other purposes,” the draft guidelines said.
The department is accepting submissions on the guide, including on whether it is easy to read and understand, if further guidance is needed and if and when businesses would use it.
A series of reforms to the RDTI will come into effect from July after they were passed by Parliament late last year.
Under the changes, companies with annual turnover under $20 million will receive a refundable tax offset for R&D set at 18.5 percentage points above the claimant’s company tax rate.
For larger companies, the size of the tax break will be calculated by a new “intensity measure”.
The Australian National Audit Office is also currently scrutinising the Industry Department and Australian Taxation Office’s administration of the RDTI, and is expected to report back in October.
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