Industry Research and Development Board Guideline
REGISTERED RESEARCH AGENCIES
INTRODUCTION
- These criteria are issued pursuant to section 39F(2) of the Industry Research and Development Act 1986.
2. The Research and Development (R&D) Tax Concession is the cornerstone of the Government’s suite of innovation support programs designed to make Australian Industry more internationally competitive.
3. The incentive enables eligible companies to claim up to 150 per cent of eligible R&D expenditure as a tax deduction against assessable income.
4. An important aspect of the Government’s commitment to R&D is to facilitate increased linkages between public sector research organisations and industry and to improve access by small to medium companies to expert R&D assistance through the Registered Research Agency program.
WHAT IS AN RRA?
5. A Registered Research Agency (RRA) is an organisation approved by the Industry Research and Development Board (the Board) that is capable of carrying out contracted Australian R&D, in one or more classes of activity, on behalf of eligible companies, or through collaborative arrangements for a group of companies.
6. RRA status is provided for by sections 39F, 39G and 39H of the Industry Research and Development Act 1986 (the IRDA).
7. Organisations which will be considered for RRA status include:
- private sector profit and non-profit R&D organisations;
- educational institutions such as universities and other higher education institutions;
- autonomous public sector science and technology research institutes, and
- R&D units from Commonwealth and State Government institutions.
8. To facilitate access to RRAs, a public register is maintained by the Board, and is published each year identifying each RRA, the classes of R&D performed and the people to contact. The register is available for inspection by any person on request and may be used in helping potential client companies identify suitable RRAs.
ADVANTAGES TO COMPANIES CONTRACTING WORK TO AN RRA
9. RRAs offer their clients a number of advantages:
- expenditure for Australian R&D work contracted to an RRA, within approved classes of activity, is eligible for the full 150 per cent deduction in the year of income, irrespective of the annual R&D expenditure of the claimant. That is, the normal annual expenditure threshold of $20,000 does not apply; and
- prepayments for contracted Australian R&D may be claimed by companies up to 12 months in advance of the work being carried out.
10. A company proposing to use an RRA and claim the concessional deduction for the work should be aware that the contracted Australian R&D must be related to an eligible project and must be in one or more of the classes of activity for which the RRA is registered. Also, the company must be capable of utilising, or must have formulated a plan to utilise, any results of the R&D directly in connection with a business that the company carried on or proposes to carry on. Companies should seek guidance from the Board as to their own eligibility requirements.
HOW TO BECOME AN RRA
11. Organisations seeking RRA status must submit an application to the Board which addresses the registration criteria. Applicants which satisfy the criteria will be registered. The date of effect of RRA status will generally be the date of receipt of a completed application form.
12. Applicants for RRA status must nominate the class or classes of activity in which it is proficient and willing to perform contract R&D. The primary classes are listed in Appendix A of the application form. Provision is made for a qualifying description and contact details to be shown in the public register.
13. If the Board does not register an applicant, the applicant must be provided with the reasons for refusal.
REGISTRATION CRITERIA FOR RRAS
14. The Board, pursuant to subsection 39F(2) of the IRDA has formulated the following criteria to be met by bodies wishing to be registered as research agencies under section 39F:
Employment criterion
For an organisation to be considered an RRA:
- it must employ a minimum of one full-time research person and another four full-time, or full-time equivalent, research staff;
- the full-time researcher must have tertiary qualifications to university degree level in science or technology; and
- of the balance of the minimum of four full-time or four full-time equivalent staff, each staff member must have either
* tertiary qualifications to university degree level in science or technology; or
* no less than five years of referable research experience in a particular scientific or technological field.
Facilities criterion
Organisations seeking RRA status must have research and development facilities in Australia:
- which shall be sufficient for the research staff to undertake their work; and
- which shall be appropriate to the field or fields of research in which the RRA seeks to be registered
Pricing structure criterion
- The fee and charges structure of the applicant must be on normal commercial terms.
Multiple client criterion
- An organisation seeking RRA status must hold itself available to undertake work on behalf of companies which are not related to the organisation as determined for the purposes of The Corporation Law.
15. An organisation owned and controlled by a tertiary education institution or Government research organisation, where the founding institution or organisation is itself an RRA, which can satisfy the Board that it has guaranteed unrestricted access to the research and development facilities and research personnel of the founding institution or organisation is not required to satisfy Criteria 1 and 2, but must satisfy the Board that they meet Criteria 3 and 4.
16. The following organisations are not required to satisfy the Board that they meet Criteria 1 and 2, but must satisfy the Board that they meet Criteria 3 and 4:
Sugar Research Institute
Bread Research Institute of Australia
Clay and Paver Institute
Welding Technology Institute of Australia
Radiata Pine Research Institute
Australian Coal Research (ACR) Ltd
OTHER CONSIDERATIONS
17. In addition to the criteria, the Board will consider the following matters when assessing an application for RRA status:
Competence
The competence of the applicant to manage and perform R&D will be assessed against:
- the administrative arrangements to plan and overseas the performance of R&D;
- any achievements which are relevant to the performance of the R&D including that which yielded commercial results;
- the annual value of R&D undertaken; and
- the principle source of income of the organisation:
Independence
The applicant will be required to demonstrate that:
- there are no grounds for a conflict of interest between itself and its clients;
- it will act in the best interests of its clients;
- clients will have control over the R&D undertaken; and
- it can maintain the confidentiality of its R&D on behalf of clients and the security of information obtained from clients.
Pricing Policy
- The applicant must satisfy the Board that, where its pricing policy is not based on normal commercial terms, as may be the case with a public sector entity, the price involves neither a use of government resources to subsidise the price nor is it intended as a means of unfairly exploiting the incentive.
ASSESSMENT
18. The Board is empowered to seek expert advice in respect of an applicant’s qualifications to perform particular R&D activities when assessing applications for RRA status. The Board may seek an assessment of the extent to which an applicant has the necessary qualifications, either by its technical and commercial assessing staff or by a referee organisation which it will appoint for the purpose.
19. In this event, the Board is entitled to charge an applicant up to $1000 (or any higher amount prescribed by the regulations) towards the cost of determining an applicant’s qualifications to perform particular R&D activities.
CHANGES TO RRA ACTIVITIES
20. An RRA must report to the Board any changes in circumstances that could affect the Board’s assessment. The Board may cancel the registration of an RRA if it fails to meet the Gazetted criteria. In such an event the Board will advise an Agency of the grounds on which it is considering cancellation of registration, the Agency then has 90 days to make a written submission to the Board on the matter. The Board must have regard to any such submission in determining whether to cancel a registration. If the Board cancels a registration, it shall provide the Agency with written reasons for the cancellation.
21. Also, an RRA is entitled to vary the class or classes of research and development activities for which it is registered.
OTHER RESPONSIBILITIES OF AN RRA
22. Control over R&D programs: Each RRA should have an appropriate management structure to manage the R&D activities of the Agency, such as a committee.
23. Financial records: Each RRA should maintain separate financial records for its R&D activities performed on the behalf of others.
24. Reports on R&D activities: Each RRA will be requested to report annually to the Board on its R&D activities. A questionnaire will be issued for this purpose.
25. Ownership of R&D results: All results of R&D activities must be owned by the company which contracts the RRA to undertake the work; this includes the results of any work which may be subcontracted by the RRA.
26. Contractual arrangements: An RRA should maintain and make available on request records of R&D work for, and charges made to, eligible companies together with copies of contracts to which the R&D work relates.
27. Duration of status: Successful applicants will remain registered while the 150% tax concession scheme remains in place. Registration is subject to satisfactory annual returns being submitted to the Board.
FURTHER INFORMATION
28. More detailed information can be found in:
- Tax Incentive - Guide to Benefits
- Section 73B of the Income Tax Assessment Act 1936
- Part IIIA of the Industry Research and Development Act 1986
Or by contacting the Board either in writing or by telephone as set out below:
The General Manager
Tax Concession Program
Department of Industry, Science and Technology
GPO Box 2704 51 Allara Street
CANBERRA ACT 2601 CANBERRA ACT 2601
Phone: (06) 276 1190 Fax: (06) 276 1091
13 2846
Dated this 12th day of April 1995.
John Plunkett
Chairman
Industry Research and Development Board