Important:
- To claim the R&D tax credit, you must submit a detailed statement online.
- In most instances, the last date for submitting a detailed statement was April 30 2010. Find out more
Calculating the limit on expediture if you are not part of a group
Calculating your eligible internal software development expenditure
For a developer who is not a member of any internal software development group, the eligible expenditure on internal software development which a tax credit may be claimed for is limited at $3 million for a full year.
If the person is not a member of any group in a part-year, the following formula applies to pro rata the limit on a daily basis.
| $3 million x days* 365 |
*Where "days" is the number of days they were not a member of a software development group.
Eligible expenditure not related to internal software development is not affected.
Example - not a member of a group for part year
Company A and Company B both have a balance date of 31 March. Company A undertakes internal software development. For the first 73 days of the year, Company A is not under common control with any other developer. However, on 13 June 2008, Company B - also a developer - buys 100% of Company A.
In claiming a credit, Company A is limited to eligible expenditure of $3 million x 73/365 = $600,000 for the period when it did not belong to any group.
If Company A's actual eligible amount for the period is less than $600,000, it can claim a credit for the full amount. If Company A's actual eligible amount for the period is $700,000, Company A will only be able to claim a tax credit for $600,000.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
Find out more
- Work out if you are affected by the limit on software development expenditure
- About the limits on internal software development expenditure
- Requirement for developers to group themselves with other developers under the same control
- Allocating the limit across members of a group
- Applying to have the limit on internal software development expenditure increased
Date published: 30 Sep 2008
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