Video 5: Tracking SR&ED Costs – Using the Cost Worksheet
Exercise: The SR&ED Cost Worksheet
The SR&ED Cost Worksheet is your financial roadmap for the claim. It brings all your eligible expenses together—wages, contractors, materials, and more—so you can see, at a glance, what qualifies and how it all connects. Think of it as a bridge between your technical report and your accounting records.
This worksheet also makes life easier for your accountant. It organizes the data they’ll need to finalize your claim, confirm calculations, and apply the right provincial rates.
In this exercise, we’ll walk through the worksheet step by step, explain each section in plain language, and show you how to track your SR&ED costs confidently—including when to flag certain items, like capital expenditures, for your accountant’s advice.
Start by downloading the worksheet below – it’s a tool you can use to tie everything together, estimate your credit and start putting together your financial report.
(This is an example of an internal cost worksheet – it is not filed with CRA but serves as the evidence and backup behind the official numbers in the T661.)
The Key Steps
1. Start with Employees
Unspecified Employees
Add total hours worked, wages, and taxable benefits for the fiscal year.
Exclude vacation and statutory holidays.
Allocate hours and wages to SR&ED projects.
Calculate % of SR&ED time to find the claimable portion.
Specified Employees (Owners / Related Persons)
Same process, but with guardrails – Salary Cap: 2.5 × YMPE (Only 75% of eligible wages can be claimed)
2. Combine Your Labour Costs
Add up claimable wages and benefits from both groups.
Subtract any government funding (like IRAP).
The result = Net Employee Labour Costs for SR&ED.
3. Add contractor Costs
For each project, total the invoices from contractors performing SR&ED under your direction.
Combine multiple invoices into one project total.
4. Record Materials Consumed or Transformed
Enter costs of items used up or fundamentally changed in experiments or prototype work.
Include only what was consumed during SR&ED activities.
5. Track Capital Expenditures
Record the cost of assets used in SR&ED (lab equipment, testing rigs, 3D printers).
These don’t usually qualify directly but may be deductible under other tax rules.
Flag them for your accountant to review.
6. Estimate Your SR&ED Credit
The worksheet calculates your total based on:
Net Employee Labour Costs
Contractor Costs
Materials Consumed
Provincial SR&ED Credit Rates (Provincial rates vary—ask your accountant and make sure your worksheet reflects your province’s current rates).
7. Review and Finalize
Double-check that every cost ties to an SR&ED project.
Confirm your numbers match your documentation (invoices, payroll, contracts).
Share your completed worksheet with your accountant for validation – your accountant will work with you on the actual filing
NEXT Steps
Let’s continue with a deeper dive into eligible expenses.
