As the end of the financial year FY23 approaches, it's important for businesses to ensure that their record-keeping is on point in order to be compliant with R&D tax incentive regulations. This includes documenting R&D activities, capturing R&D effort in timesheets, reviewing R&D expenditure, and ensuring that employees' roles and responsibilities reflect their involvement in R&D activities. To help you with this process, we have created a checklist of 10 key tasks that you need to complete or have in order before the deadline.
Finalise your record keeping
Have you captured adequate background research to explain why you needed to undertake R&D in FY22/23? Including:
Analyzing competitors,
Reviewing technical literature,
Seeking expert opinions.
Have you adequately documented your R&D activities? Including:
Developing a testable theory statement or hypothesis,
Describing at least one experiment for each core activity,
Making observations and drawing logical conclusions about your results.
Have you captured your R&D effort in a timesheet?
You can still capture time for FY22/23 in Synnch.
Your R&D team can be added to a bulk timesheet to quickly capture their effort.
Finalise payments to associates
Do you incur R&D expenditures paid to company associates in contractor arrangements, such as Directors?
Ensure these payments are finalised before June 20, and the expenditure is paid and incurred in the FY23 income year, so it can be captured in your claim.
Analyse R&D expenditure on big-ticket items, and ensure you have adequate records to claim
Did you use R&D contractors to undertake R&D activities?
Can you clearly identify R&D costs on their invoices or scopes?
If not, create a record in Synnch.
Did you purchase and utilise fixed assets in your R&D activities?
Have you kept records of your utilisation?
Have you discussed depreciation options with your Accountant?
Have you hired any new technical staff?
Have you captured their activities within Synnch, with adequate timesheets?
Review your estimated R&D Floorspace usage
How much floor space do you allocate to R&D Activities? You can update this in Synnch in your client profile/company details.
If you wish to lodge quickly, ask your accountant to finalize your financial statements ready to send to your R&D consultant.
Have your accountant prepare your Draft Income Tax Return or amended Income Tax Return to avoid delays with claiming your offset.
Connect Xero to Synnch to start getting contemporaneous records and nexus of your expenditure.
If you’re not already using Synnch, contact your R&D Consultant to ask what technology summaries or requests for information they are likely to send you so that you can start trawling your emails and systems for what they might need. This is always time-consuming and distracts you from your business.
Compile and review position descriptions for employees engaged in your R&D Project and determine whether their roles and responsibilities adequately reflect their involvement in R&D Activities.
Review any governance documents, standard operating procedures, meeting rituals or processes for your innovation workflow. This can underpin the governance of your R&D Tax Incentive claim and can be provided by Synnch if these foundational elements don’t exist in your business.
Completing these 10 key tasks will ensure that your R&D claim for the financial year FY23 is accurate and compliant with the regulations. To stay in line with contemporaneous record-keeping, it's important to start working on these tasks now to avoid any missed opportunities. If you need any help or support with any of these tasks, the Synnch team is here to assist you.