How companies are benefiting from big tax rebates on qualifying R and D
It is an exciting time to be part of a start-up company. It can also be a challenging time. Sometimes the costs of establishing a company eat up all the profits of its early years: registration fees; setting up premises; tools and equipment; marketing and advertising… the list goes on. While some research and development may really help propel the business forward, it is likely to slip lower on the list of priorities when cash flow is a challenge. Nevertheless, there may be advantages to making certain types of research and development a priority.
Three Great Benefits of Research and Development
Gain exclusive insight into your business, products or services. Find better ways of manufacturing. Discover unique solutions to problems. Develop great new products. In short, uncover the means to get ahead of your competitors.
Receive generous tax incentives. The Government will rebate up to 43.5% on qualifying research and development investments made by your company. Spend $100K on R and D and you could get $43.5K back to reinvest in your company.
Attract more investors. The Government’s early innovation start-up concessions provide that if someone invests in what is classified as an ‘innovative start-up’, they may also be eligible to receive tax concessions. If your business is investing in qualifying R and D, you may be considered to be an innovative start-up and thus more attractive to investors.
Great, how do I qualify?
There are some major things that determine if you qualify for a rebate. Firstly, you must be operating as a registered as a company with ASIC. Any research and development you conduct as a sole trader will not qualify for an R and D rebate.
You need to apply to the Department of Innovation, Science and Economic Development to have your R and D registered. The research must not already be available. Your R and D must be on something unique that is yet to be scientifically investigated. The answer has to be unknown when you start the research and development process.
The research and development must pertain to something you are taking to market. It cannot, for example, be for developing internal software that will only be used by your staff. The development must somehow improve products, manufacturing processes or profitability.
Once you have put in an R and D claim with the ATO, the economic benefits must flow back to the company.
This is definitely an area in which companies do need to take care. Some people have been stung for using the rebate in the wrong manner or claiming it when it does not actually qualify. The ATO is alert to dodgy conduct with regard to this rebate, so do be careful and ensure you are doing the right thing.
There is a deadline. Any R and D conducted in the 2019 financial year must be claimed by no later than April 2020. If you miss the deadline, you miss out.
How Can We Help?
CountPlus One can help you ensure your claim qualifies and is ATO compliant.
We can help with your application to have your R and D registered and approved by the Department of Innovation, Science and Economic Development. The application may be done in advance or retrospectively.
We can also look over your company structure to ensure it is properly set up. At the same time, your company may also be eligible for other grants that will help it grow.
And of course, we can help by preparing and lodging your company’s tax return before the April 2020 deadline.
In the start-up phase of a company, cash flow is the biggest issue. Getting 43.5% back on R and D is a massive help. It is money you get to put back into the business to fund the ongoing business development without having to pay interest on a loan or having investors on board. It can provide a significant boost in the short-term.
Talk to our friendly team at CountPlus One about your company’s research and development plans and learn more about the finer details of qualifying for this rebate.
Written by Phillip Grantham
Phillip Grantham is an accounting principal with Countplus One. Get in touch with Phillip to discuss the benefits available for R and D and early innovative start-up companies.