R&D updates from Federal Budget
The recent Federal Budget included Research & Development (R&D) announcements that were a big relief across all industry sectors.
The Treasurer back-pedalled on the previously proposed bill, which would have resulted in reducing the cost of the R&D Tax Incentive by $1.8 billion over four years.
Instead, the Government will increase funding through a range of amendments that will encourage companies of all sizes to invest in conducting R&D activity.
The tax incentive will also remain unchanged for the 2019 and 2020 financial years, providing a reprieve from the previously proposed legislation, which was to retrospectively apply for income years commencing on or after 1 July 2019.
Key changes to emerge from the 2020-21 Federal Budget were:
- From 1 July 2021, companies with a turnover of less than $20 million will attract a tax incentive of 18.5% above the prevailing company tax rate.
With a 25% company tax rate proposed for the 2022 financial year, companies with sufficient losses will retain the ability to receive 43.5 cents for every dollar spent on R&D.
- Companies with an annual aggregated turnover of $20 million or greater will continue to be entitled to the non-refundable offset of 8.5% above the company tax rate.
However, those which spend more than 2% of total expenses will be entitled to an additional 8% intensity premium, resulting in a potential incentive of 16.5%.
- Removal of the proposed $4 million cap on the refundable offset.
Wine Industry Grants
There are a range of grants available to the wine industry nationally. Below is a summary of what’s currently on offer:
Wine Export Grants
This program aims to reduce the transaction costs of securing new distribution channels for wine exporters and to promote wine exports, and in doing so increase the opportunity to grow exports from Australia.
It forms part of the Australian Government’s $50 million Export and Regional Wine Support Package which seeks to transform the Australian grape and wine industry by driving demand for wine exports and showcasing Australia’s wine tourism to the world.
The grant will be calculated as 50% of total eligible expenses, plus an allowance of $350 per day. It will act as a reimbursement for costs already incurred.
Only expenses incurred on or after 1 July 2020 will be eligible for claiming under the grant and applicants can make a maximum claim of $25,000.
Eligible applicants include wine producers in Australia who must:
- Have an aggregated turnover of less than $20 million, including an export turnover of less than $5 million, during the financial year immediately preceding their application.
- Promote their Australian wine product for export; this includes the export promotion activities being applied for through this grant.
This program is open on an ongoing basis until 21 May 2021, or until funds are exhausted, whichever comes first.
The Manufacturing Modernisation Fund (MMF) seeks to support transformative investments in manufacturing technologies and processes. It is also intended to address barriers to growth and innovation in Australia’s manufacturing industry.
This fund is open to a range of industries and the second round was announced in the Federal Budget. Applications are expected to open and close by Christmas this year.
MMF Round 2 will:
- Co-fund capital investment technology upgrades that help transform businesses.
- Help create and maintain a highly skilled Australian workforce through jobs growth and upskilling.
The Export Market Development Grant (EMDG) scheme, like the MMF, is available to a range of industries, including wine. The scheme:
- Encourages small- and medium-sized Australian businesses to develop export markets
- reimburses up to 50 per cent of eligible export promotion expenses above $5,000 provided that the total expenses are at least $15,000
- provides up to eight grants to each eligible applicant.
In addition to the Federal initiatives listed above, there are a range of State and Territory based wine-specific grants, including:
- ACT Smoke Taint Grants: closes 31 Dec 2020.
This program seeks to support wine grape producers who have suffered crop damage from smoke taint caused by the Black Summer 2019-20 bushfires, and who are located outside the areas that are eligible for the Emergency Bushfire Response in Primary Industries (EBRPI) and Small Business Bushfire support grants. Grants of up to $10,000 (GST exclusive) are available on a dollar-for-dollar matched funding basis.
- Rural Finance – Wine Grape Smoke Taint Grant: Closes 31 Dec 2020.
This Victorian program seeks to support wine grape producers who have suffered crop loss from smoke taint caused by the 2019-20 bushfires, and who are located outside of Disaster Recovery Funding Arrangement Category C Declared Areas (for the 2019-20 bushfires).
- The objective of the program is to provide support to Victorian based wine grape producers who have suffered:Crop loss from smoke taint.
- A decline in revenue or a decline in grapes harvested of 40% or more in a three-month period (compared to the same three-month period in the previous year) since 21 November 2019.
- Grants of up to $10,000 (GST exclusive) are available on a dollar-for-dollar matched funding basis.
To find out more about the R&D Tax Incentive, Federal Budget announcements or for assistance in preparing applications for any relevant grants, please get in touch.