News and Research | AusGrant - Leading R&D Grant Writers - Part 5

Quality Australian livestock – it is one of our national icons that is quintessentially Australian, along with vegemite, football, and pineapple on burgers. In fact, last year alone, Australian livestock products were shipped to 150 different countries.

Indeed, Australia is competitive in producing quality meat, which according to Dr Barnard, the General Manager of Trade and Economic Services for Meat and Livestock Australia, is due to having the best practices.

However, it could come as a shock to several that activities characteristically related with agriculture and farming can qualify for the research and development (R&D) tax incentive. With developments in the food sciences and the concern of feeding an increasing population, those in the agriculture industry have the opportunity to claim and profit from the widespread tax incentive.

In fact, the R&D Tax Incentive is the biggest scheme in Australia that aids businesses participating in research and development. Over $1.8 billion is granted annually and it is not competitive – in other words, if you are eligible then you are permitted to it. The classification is deliberately comprehensive as the Government wishes to support R&D across various business and industry sectors. Thus, highlighting the fact that it’s not just about ‘white lab coat’ research, but rather, encompasses all types of research and industries.

Moreover, farming and agriculture have a surfeit of prospects for experimentation, such as disease control, irrigation, new product development, more proficient or economical harvesting techniques and soil development.

Overall, numerous businesses are missing out on the government incentive for R&D benefits purely because they did not know whether or not they were eligible for the incentive. In light of this, providing guidance to you on what undertakings are eligible, and facilitating you to comprehend the business benefits and key features of the offset, is what AusGrant do best. Contact us today to find out more or if you could be eligible for generous tax benefits.

Certainly, the phrase “innovation” has become politically fashionable this week due to the release of Malcom Turnbull’s Innovation Statement. The agenda has injected confidence in small companies (SME) across Australia as the nation seeks to be more digitally steered. However, many small  or young firms may be unaware that there are already measures they can be taking to maximise their cash flow. The research and development (R&D) incentive is intended to boost innovation and improve business processes – and can also provide companies with generous tax benefits.

Although, there is a common misunderstanding that the R&D tax incentive only relates to technology or research focused companies, such as the enormous pharmaceuticals companies. Nonetheless, any business which is innovative or undertaking eligible activities may qualify.

In fact, organisations that do not seem like they would fit the “typical research type” may be able to claim – including retailers, wholesalers, healthcare organisations, renewable energy providers, food manufacturers and many more.

Furthermore, micro businesses that participate in research and development are much more inclined to have increased development in sales and profitability than firms of the equal size that don’t undertake research activities.

However, when it comes to actually making a claim there is often a great deal of ambiguity about how to make a valid R&D claim. The perceived complexity could be another reason why many small businesses are not taking full advantage of the scheme. Yet, it is important to note that the R&D Tax Incentive is one of the most effective methods of support for research in Australia and provides companies with up to 43.5 cents back for every eligible dollar – even in cases where small or young firms aren’t yet paying tax.

If you think your company may be eligible for the incentive, have a chat to our R&D tax specialists who will be able to answer any further questions or help you make your claim. The earlier you get the ball running and submit your application, the sooner your small company will receive their refund.

On Monday the Turnbull government released the much anticipated Innovation Statement. The agenda involves 24 measures and is pitched to be a prototype for revolutionising Australia into a society that is innovative. However, as we mentioned yesterday, despite the anticipations of many, the R&D Tax Incentive has no changes mentioned in the plan. Nonetheless, the Innovation Statement did announce a new independent body, Innovation Science Australia (ISA), who is expected to conduct a review in 2016 of the R&D scheme.

In the meantime, entrepreneurs have highlighted the benefits R&D has on innovation and how it is a vital tool for start-ups. James Wakefield, co-founder of InStitchu.com.au, articulated to the Business Insider that “the R&D grants and incentives as they stand in Australia have made it worthwhile committing to growing an Australian-based business… The Australian government is already is extremely supportive and the current R&D model highlights the importance that they are placing on growth and innovation remaining in Australia.”

In addition, Adrian Di Marco, executive chairman and founder of TechnologyOne stated that, “start-ups need to recognise the importance of ongoing R&D investments, and need to continuously improve and evolve their products to meet market demands. Through R&D, start-ups can continue to reinvent themselves and their business to keep pace with changing technologies and market developments. At TechnologyOne, our significant investment of 20 per cent of revenue back into R&D ensures we are encouraging local and sustainable innovation.”

Certainly, as the above reveals, there is no denying that the R&D tax concession is one of the largest single support policies for innovation. Despite there being a possible changes to the scheme when ISA becomes effective in July 2016, in the interim, the R&D Tax Incentive remains the same and offers valuable support to companies. Thus, businesses should still participate in R&D business activities as per normal and can still obtain generous tax benefits from their R&D investments. If you think your company may be eligible,  please contact AusGrant to learn more about the R&D scheme.

The ‘ideas boom’, aptly named by Turnbull,  has been pledged to transform Australia into an innovative society with the convenient assistance of $1.1 billion federal budget. The key piece of agenda that is fuelling this ‘boom’ is the Innovation Statement, which was released yesterday in Australia. The statement outlines 24 initiatives across 11 government sectors and will cost the government $1.1 billion over the next four years.

The Innovation Statement report includes tax incentives which could provide a huge boost for our entrepreneurial ecosystem and could drive cultural change. Notable policy changes include the fact that investors in start-ups will be able to claim tax rebates of up to $200,000 a year as well as capital gain tax exemptions. Aside from tax breaks for investments, the federal government will add almost $3 billion into research facilities and science programs over the next 10 years. Moreover, the Turnbull government will offer a 20 per cent income tax rebate for retail investors (capped at $200,000 per investor per year) in order to lure everyday investors away from real estate and shares.

In relation to the R&D Tax Incentive, the Innovation Statement included no changes to the current scheme. However, it is important to note that in 2016 Innovation Australia will be replaced with Innovation and Science Australia (ISA), which will be the new body advising the Government on innovation policy. Hence, next year there may be proposed changes to the R&D tax incentive under this body. Furthermore, there is currently two surveys underway which are reviewing the R&D incentive – one by Tax White Paper and one conducted by the Centre for International Economics.However, the findings of these have not yet been finalised yet and they are suspected to be released in 2016. Hence, the results from these may impact how the government pursues the R&D Tax Incentive in 2016-2017.

Nonetheless, since the R&D Tax Incentive currently remains untouched, businesses are encouraged to engage in R&D activities as per usual. Furthermore, if you have conducted R&D in your business, you may be eligible for substantial tax savings. Contact AusGrant today to talk to a specialised R&D Tax consultant and find out if you could benefit from the scheme.

Last Friday the government released its 2015 Australian Industry Report which overviewed economic activity across industries. A chief segment of the report was an analysis of Australian and international studies regarding the impact of government-funded R&D tax incentives.

The examination arises in advance of the Turnbull Government producing its Innovation Statement today, which is predicted to include changes to the R&D Tax Incentive.

The report highlights the benefits of R&D and how it can be used as a main vehicle for innovation and firm competitiveness. In specific, the report notes, “New or significantly improved products and services can be sources of increased profits for innovating firms, while process innovation can lead to productivity and efficiency improvements. R&D therefore supports the underlying firm objective of profit maximisation while enabling firms to increase their market shares.”

Furthermore, according to the breakdown contained in the report, “…R&D is not persistent enough to be sustained over the long term without strong turnover or external stimulants such as spill overs and tax incentives, and it would rapidly fall to zero if not supported by other means such as strong sales or government assistance.”

Whether the Innovation Statement brings changes to the R&D Tax Incentive or not, Ausgrant can assist you in understanding more about the R&D tax scheme and if your company is eligible. Contact us today to talk to an R&D Tax specialists and find out more.

As Australia embarks on a more innovative journey, one that Turnbull has touted to be more digital, the role of software may become more central to businesses in the private sector. In regards to the Research and Development (R&D) Tax Incentive, claiming software development may be eligible depending on the firm’s activities.

Research and development for software entails that as portion of your development, you face technical challenges or complications that could not be simply deciphered with standard research. Hence, to overcome these issues or to generate the functionality that you need, you commence an “experimental process” to resolve the issue. An “experimental process” in software is characteristically where you have tried diverse methods, unalike algorithms, dissimilar structures or systems to crack the problem.

In relation to this, the incentive rewards R&D undertakings that seek to elucidate distinct technical difficulties. However, with concern to software, there is supplementary eligibility criteria around anticipated usage:

• If your aim is to retail the software you create, it’s eligible.
• If your aim is to progress the internal administration of your business, it’s generally not.
• If your purpose is to cultivate a new system that exceeds previously accessible functionality – and it is unique to the market – it’s likely to qualify.
• If your aim is build a glossy website from existing tools, it won’t.
• However, if your bespoke website or application is business-to-business facilitated and increased exclusive functionality – aspects of its development could indeed qualify.
• Lastly, where your distinctive software application is part of the process used to develop or manufacture your product, the incentive may apply.

Thus, there is indeed a significant amount of perplexity in this area and, as a result, many companies are not aware of the extent of their eligible activities, or that they are eligible at all. AusGrant offers expertise across a broad range of industries and can assist in identifying if your research or development activities qualify. Contact us today to find out if you could achieve tax cash savings under the R&D incentive.

The government is currently preparing to release the pledged Innovation Statement, which will include more than 30 measures to boost the new economy. The statement, expected to be released on the 9^th December, is anticipated to include changes to the R&D Tax Incentive. In specific, the incentive is predicted to overhaul the incentive payment to foster innovation and promote collaboration between industry and the university sector.

However, is the Australian government placing academic research before considering critical industry insights? According to BDO, the Innovation Statement is due prior to the finalisation of the R&D Tax Incentive registrant’s survey.  The industry survey is part of the larger ‘Re:think Tax White Paper’ process and launched only just this month.

In relation to this, Nicola Purser, BDO research and development partner, believes that this is counterproductive to the spirit of innovation and the absence of commercial insights is incredibly inept. Purser notes, “It is disconcerting that the Australian Government is planning to announce its ‘revamp’ of the R&D Tax Incentive prior to finalising this survey and gathering the insights from business… In terms of specific measures, I would urge the Australian Government to consider more carefully the critical factors of expediency and promptness in commercial R&D, factors often misunderstood by academia and the public sector.”

Nonetheless, only the future will tell what lies ahead in the revamp of the R&D Tax Incentive. However in the meantime, as the incentive currently stands, businesses can gain back significant tax credits on investments they have made. Moreover, AusGrant and our team of specialist advisors will be able to assist you with any possible impacts the new R&D Tax Incentive may have. Contact us today to find out more about the R&D Tax Incentive and if your business qualifies.

Australia, aside from beautiful sweeping planes and a romanticised title as a ‘sunburnt country’, the nation is also shaping up to be an ideal environment for conducting research.  In fact, according to The Sustainable Tourism Cooperative Research Centre, Australia’s R&D spending has increased about fourfold over the past three decades. This detail, coupled with the government’s mission to increase innovation in Australia, is creating a positive outlook for the future of research in Australia.  Thus, with this in mind, foreign companies who want to undertake research in Australia may be wondering what incentives are available to them.

As we’ve mentioned previously, the R&D Tax Incentive offers companies a heavy cash refund of up to 43.5 cents in the dollar for eligible activities for Australian firms. However, in 2011 when the Australian government changed the R&D Tax Concession to the R&D Tax Incentive, the legislation expanded and the 43.5 cent ‘cash back’ benefit became available to some foreign companies who undertake R&D in Australia.  Hence, prompting the question, could your foreign firm claim the R&D tax offset in Australia? We’ve looked at three common questions you may have.

What’s its value?

The quantity that a foreign entity can claim through the R&D Tax Incentive is governed by the turnover of the company and if it has documented a profit or loss in the financial year in which it claims. The benefits array from a tax reduction of 10 cents for every dollar spent on R&D for profitable companies who turn over more than $20 million, to a cash refund of 43.5 cents in every dollar spent on R&D for companies in loss who turnover less than $20 million. The subsequent information offers a more precise summary:

Example 1:

• An Australian subsidiary company, (Company K) may be eligible for the R&D tax incentive, where:
• Company K, is an Australian company wholly owned by Company J and qualifies as an R&D entity;
• its parent company (Company J) is a foreign resident incorporated under foreign law and is a incorporated in a country that has a double tax agreement with Australia;
• Company J controls Company K;
• Company K and J and any other companies that two companies are associated with, have a collective aggregated turnover of less that AU$20 million;
• Under an agreement, Company K agrees to undertake R&D activities in its Australian office solely for the benefit of Company J;
• In the agreement, Company J does not own any Intellectual Property (IP) generated out of Company K but is legally entitled to all IP arising from the R&D activities;
• Company K incurs $100,000 in R&D expenditure for the 2017 Financial Year;
• The R&D activities are being conducted solely for Company J;
• The consideration between the two companies is at arm’s length and will be paid even if the R&D is not successful.

Requirements for setting up an Australian Company?

Foreign companies will need to set up an Australian company, and expect the following:

• Costs to setup the company to not exceed AU$2,000 to incorporate an eligible Australian entity in order to claim the R&D Tax incentive.
• Company incorporation within Australia can take between  2-3 weeks.
• Foreign entities will require the availability of an Australian resident director
• The Australian Financial year runs from 1 July to the 30 June, however foreign entities can submit an application to the ATO for a substitute financial year to align with their parent company’s timeframes.

How do I claim my expenditure?

• Eligible Australian subsidiaries will need to register their activities with AusIndustry no later than 10 months after the Australian companies year end.
• R&D expenditure is claimed through the lodgement of an R&D Tax Incentive claim as part of their annual income tax return.

AusGrant works closely with Swanson Reed on this specialist field. Both organisation work together to  assist foreign organisations to determine eligibility and assist in making a claim for R&D tax incentives in Australia. Contact us today to find out more information or if you are eligible.

The notion of ‘research and development’ is often erroneously believed to be only reserved for larger companies or those draped in white coats, yielding test tubes or microscopes. However, previous data analysis has found that small and medium (SMEs) and large firms had similar levels of variation of R&D expenditure. With Turnbull’s rise to the role of Prime Minister, the term ‘innovation’ has become shorthand for all that encompasses future business in Australia.

With this in mind, when it comes to government incentives for smaller and start-up companies, you can’t undervalue the worth of the R&D Tax Incentive for a developing business.

The Research and Development (R&D) Tax Incentive is one route that is obtainable for start-ups and offers companies up to 43.5 cents back for every eligible dollar – even in cases where start-up firms aren’t yet paying tax.

Presently, for business owners who have not applied for the R&D Tax Incentive before, it is a directed, substantial entitlement program that may aid business owners offset some of the costs of doing R&D. The incentive’s purpose is to assist more businesses to do R&D and innovate.

In summary,

• Companies may obtain a 43.5% refundable tax offset –  if their aggregated turnover is less than $20 million.
• For aggregated turnover more than $20 million, a 38.5% non-refundable offset can be claimed for notional deductions incurred on eligible activities.
• You must register with AusIndustry prior to lodging your company income tax return and within 10 months of your company’s income year, i.e. 30 April 2016 for a 30 June 2015 income year end.
• It is open to firms in all sectors that are undertaking eligible R&D.
• A company must have notional R&D deductions for an income year of at least $20,000 in order to claim a R&D Tax offset.

For more information about the R&D Tax Incentive contact AusGrant today to find out if you qualify or with any questions you may have.

If you are just in the preliminary stages of a business you may not be acquainted with the Research and Development (R&D) Tax Incentive scheme obtainable from the Australian government. The incentive helps businesses by offsetting some of the costs of performing R&D. Many companies are not aware of what institutes as research and development, consequently missing out on a significant cash injection for their business. We’ve delved into 4 common questions below to provide you with more information on the R&D Tax Incentive:

1. What is the R&D Tax Incentive?

If you’re conducting research in Australia, then the R&D Tax Incentive is one of the most efficient forms of support. Under the scheme, the government provides companies with up to 43.5 cents back for every eligible dollar. The research doesn’t have to involve creating vaccines or launching rockets, but rather, any firm who is developing or improving products, processes, or software may be eligible.

The R&D Tax Incentive currently has two core components:

• 43.5% refundable tax offset for eligible entities with a turnover of less than $20 million per annum provided they are not controlled by income tax exempt entities.
•  Non-refundable 38.5% tax offset for all other eligible entities. Unused non-refundable offset amounts may be able to be carried forward to future income years.

2. Do I need to pay tax or myself a salary to get the incentive?

You don’t need to have paid tax to get the incentive. Several small businesses can receive the benefit in a cash payment.

However, to claim expenditure under the incentive, you must incur the expense in your company accounts. If you are an owner of the business, salary needs to be paid within the year.

3. Can I claim R&D conducted overseas?

Companies may be able to claim overseas activities, but this is usually reserved to aid companies that can demonstrate they could not have conducted the R&D locally.  In addition, the deadline for these applications is different – firms must apply within the same financial year as the activities were undertaken.

4. Is my project eligible to submit an R&D application?

R&D projects typically encompass a set of activities with start and finish dates, commenced to produce a specific piece of new knowledge. Under the R&D Tax Incentive scheme, eligibility is determined on an activity foundation rather than on a project foundation. Eligible activities fall into two classes, core R&D activities and supporting R&D activities, both of which can be claimed.

Want to know more? Contact our R&D tax specialists today to find out if your activities are eligible.