ATO & AusIndustry guidance relating to feedstock adjustments

A feedstock adjustment is an amount you include in your assessable income. It applies when you obtain an R&D tax incentive offset for your feedstock expenditure incurred on R&D activities. When claiming the R&D Tax Incentive, a company is required to make a feedstock adjustment if it supplies or uses products produced during its R&D activities. The adjustment reduces the net R&D tax benefit through a calculation that increases assessable income.

The feedstock adjustment applies to expenditure incurred on:

Goods or materials (feedstock inputs) that are transformed or processed during registered R&D activities in producing one or more physical products (feedstock outputs);
Energy input directly into that transformation or processing;
Amounts claimed for the decline in value of assets used in acquiring or producing feedstock inputs;

Companies should make an assessment of the tax benefit arising from a claim for feedstock expenditure to determine whether it is optimal to include costs of such activities within their claim. Regard should be given to the following factors when assessing this:

The amount of feedstock revenue relative to the corresponding feedstock expenditure;
Whether the company is claiming under the Refundable or Non-Refundable R&D Tax Offset;
If a company is claiming under the Refundable R&D Tax Offset, whether surplus tax losses are available during an income year

For further information, please see the full AusIndustry and ATO joint guidance titled “Can an R&D entity choose not to claim feedstock input and avoid feedstock adjustments?”

For further information on feedstock adjustments or for further help substantiating your R&D Tax claim, please Contact Us.

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