In a new draft determination, Tax Commissioner Chris Jordan said businesses that receive a JobKeeper payment for their paid employees trigger the “at-risk rule”.
This means they cannot notionally deduct the portion of their wage expenditure incurred on R&D activities that has attracted the JobKeeper payment.
However, business owners receiving a JobKeeper payment based on its own participation in R&D do not trigger the at-risk rule, meaning they are not prevented from notionally deducting expenditure for having received a JobKeeper payment.
If a business receives a JobKeeper payment for an eligible employee who is wholly engaged in R&D activities during a fortnight, the ATO said they cannot notionally deduct so much of their wage expenditure paid to that employee as is equal to the $1,500 JobKeeper payment.
For businesses receiving a JobKeeper payment for an eligible employee who is partially engaged in R&D activities during a fortnight, the ATO said their notional deduction is partially reduced by that portion of the JobKeeper payment as is in proportion with the time the employee spends on R&D activities during that fortnight.
However, the ATO said expenditure that businesses incur on R&D activities that cannot be notionally deducted does not give rise to a tax offset under section 355-100 of the Income Tax Assessment Act 1997.
Therefore, it ruled that no extra income tax is payable under the R&D clawback rules for the portion of JobKeeper payments the business receives that trigger the at-risk rule.
The ATO said the determination has been proposed to apply both before and after its date of issue, but it added that the determination will not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the determination.