Just how many Australian startups and small businesses, conducting exciting, innovative activities, are missing out on a cash refund they’re entitled to?
PwC estimates that 2 out of 3 small companies are not accessing the government grants and incentives they’re eligible for.
One of the most popular is the R&D Tax Incentive, administered by AusIndustry. This incentive is popular among startups, innovative and emerging companies as a fast and effective way to support cash flow and to continue to grow your business.
By completing a claim you can claim up to 43.5% of the costs associated with the eligible R&D activity. For a company that is pre-revenue, this can result in a generous refund!
A grant or incentive?
Unlike a grant, where an application is assessed on quality of delivery and not all applicants who apply will receive the desired outcome, a claim for the R&D Tax Incentive is based on evidence of conducting eligible activities. If you can show that you meet this criteria, it’s likely you’ll receive a benefit.
In addition to this, the R&D Tax Incentive is a pool of funds allocated by the Federal Government to encourage innovative and research and development activity by Australian companies of all sizes and there are no limited to the number of successful claims.
How do I know if I’m eligible to claim the R&D Tax Incentive?
The eligibility criteria for the R&D Tax Incentive is fairly straightforward, however the difficulty can sometimes be in providing proof of this for your activities (more on this later).
To be eligible to claim the R&D Tax Incentive, your company must:
- Have spent $20,000 or more in the past financial year on eligible core R&D activities that have an unknown outcome
- Be structured as a company, not a trust or sole trader
- Be creating new knowledge not ordinarily known by others in your industry through your R&D activities
What is an ‘eligible core R&D activity’?
To determine if the activity you’re undertaking is a core R&D activity, ask yourself the following:
- Am I creating new knowledge – something underpinned by new and unique technology?
- Did the activity have an an unknown outcome? Did I know if it was possible before I started working on it?
- Was I conducting experimentation by a process of testing hypotheses and assessing results to prove the outcome was possible?
Core research and development activities vary from industry to industry, here’s some examples of core eligible activities:
- A food producer exploring new types of food production/recipes
- A tech startup developing a new algorithm for a web or mobile application
- A fashion designer creating a new material
- A farmer improving their automated irrigation system
Activities commonly mistaken as core R&D eligible include:
- A tech startup creating a web or mobile application
- A manufacturing company scaling the development of a product which was created through an R&D
What is an ‘eligible expense’?
The R&D Tax Incentive allows companies to claim back and offset costs directly associated with eligible core R&D activities. These expenses generally include overheads and staffing costs but only the portion directly associated with the core R&D activity can be claimed.
How to claim the R&D Tax Incentive
Nifty Grants is a seamless and affordable way to claim the R&D Tax Incentive (and other government grants and incentives). The web platform is a conveniently available 24/7 (perfect for small business owners who choose their own hours) and the pricing is transparent – flat fee based on R&D spend.
Ready to begin your R&D claim?
AusIndustry gives a 10 month window, following your company’s year end to lodge a claim for the R&D Tax Incentive. Therefore if you’ve been developing new products or technologies from 1 July 2017 up 30 June 2018, you can submit your claim from 1 July 2018 up until 30 April 2019.
If you’re a pre-revenue startup, you can get started on your claim as soon as possible to lodge and recieve your refund sooner.
Brendan White, Senior Grants & Incentives Specialist – Nifty Grants
Brendan has a software development/engineering background and joined PwC six years ago to work in the incentives and innovation team. Over this time he has worked with businesses of all sizes access the R&D Tax Incentive and Export Market Development Grants, and more recently has had a focus on early stage technology businesses and has taken the role as Operations Manager for Nifty Grants, PwC’s online offering for early stage and high growth companies.