We understand this is an unprecedented time, with many organisations taking extraordinary steps to sustain their operations and ensure their ongoing viability. Over the past few weeks, we’ve seen several organisations diversifying into new markets through the development of new products and services, while others are looking at ways to improve the efficiencies of current operations. The Research and Development (R&D) Tax Incentive can support organisations undertaking eligible R&D activities through such endeavours, including in respect of expenditure already incurred.
The R&D Tax Incentive is a generous broad-based entitlement program supporting companies developing new or improved products, processes or services, and is jointly administered by AusIndustry and the Australian Taxation Office (ATO). AusIndustry is responsible for the eligibility of activities, while the eligible expenditure associated with the R&D activities is claimed through the income tax return. It is not a competitive based system – provided a company registers R&D activities within 10 months after the end of their financial year, it can qualify.
The benefit is delivered as a tax offset for expenditure incurred on eligible R&D activities. The extent of the benefit is determined by the company’s aggregate annual turnover.
Group annual turnover of less than $20 million
The company will be able to access a 43.5% refundable R&D tax. This equates to a net after-tax benefit of 16c for each dollar spent on eligible R&D activities. Companies in a tax loss situation may also be able to ‘cash out’ the refundable offset (assuming there are no other tax liabilities) and receive up to 43.5c in the dollar on eligible expenditure.
Group turnover of $20 million or greater
The company will be able to access a 38.5% non-refundable R&D tax offset (unused offset amounts can be carried forward). This equates to a net after-tax benefit of either 8.5c or 11c for each dollar spent on eligible R&D activities (depending on whether the company’s turnover falls above or below the $50 million company tax rate threshold).
The definition of eligible R&D activities for tax purposes is broad. However, the company must be undertaking a core R&D activity to claim the R&D offset. Under the legislation, core R&D activities are experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work.
Core R&D activities are conducted to generate new knowledge (in the form of new or improved materials, products, devices, processes or services), and is based on principles of established science, which proceed from hypothesis to experiment, observation and evaluation leading to logical conclusions. Other activities that have a direct relationship to ‘core’ R&D activities, but do not themselves involve experimentation or new knowledge development (such as preliminary research), are eligible as supporting R&D activities.
Process to claim
In order to claim the R&D Tax Incentive in respect of R&D activities, an application must be registered with AusIndustry (the regulatory body administering the scheme) within 10 months of the end of the company’s year of income. Noting that companies looking to claim for 30 June 2019 have an extension until 30 September 2020.
There are also several additional grant programs available, offering direct funding to organisations impacted by and adapting to the COVID-19 pandemic, including those listed below. Organisations may be able to apply for a grant in more than one location if they have operations across multiple states.
QLD – Market Diversification and Resilience Grants Program - Closed
Grants of up to $50,000 for projects and $7,500 for equipment purchases to assist Queensland agriculture, food and fishing exporters and their critical supply chain partners, as well as industry organisations working with exporters, who have been impacted by the coronavirus outbreak.
QLD – Small Business COVID-19 Adaption Grants
Grants of up to $10,000 are available to small businesses to adapt and sustain their operations and build resilience. Applications have closed for SEQ, but are still open to regional QLD.
NSW – Small Business Support Grant - Closed
Grants of up to $10,000 are available for small businesses that have been subject to closure or highly impacted by New South Wales’ Public Health Directions.
NSW – Export Assistance Grant
Grants of up to $10,000 supporting a 50% reimbursement for export expenses paid since 1 January 2020.
VIC – Business Support Fund
Grants of $10,000 are available for small businesses that have been subject to closure or highly impacted by Victoria’s Public Health Directions.
VIC – City of Melbourne Council COVID-19 Quick Response Grants - Closed
Grants of up to $2,000 for training and professional development, $5,000 for investing in online and e-commerce activities and $10,000 (matched funding) for capital work projects for SMEs in the City of Melbourne municipality.
VIC – Small Business Transformation Grants
Grants of up to $5,000 supporting businesses in the CBD, Southbank, Docklands and World Trade Centre postcodes, open to all sectors except hospitality businesses eligible for the CBD Small Hospitality Grant.
VIC – CBD Small Business Hospitality Grant
Grants of $5,000 or $15,000 to support hospitality businesses in Melbourne CBD that previously received a grant under the Business Support Fund.
SA – Small Tourism Business Grants Fund - Closed
Grants of up to $10,000 are available to support sole traders and small tourism businesses who have experienced a financial loss as a result of COVID-19.
SA – Wine Industry Development Scheme - Closed
Grants of up to $200,000 per project are available to support industry development in the wine sector and initiatives with a particular focus on technology and innovation. Funding for the 2019/20 round of this program will focus on projects that will support the South Australian Wine Industry through the impacts of recent bushfires, smoke exposure and the evolving impacts of COVID-19.
NT – Business Improvement Grant - Closed
Under this $20 million fund, all NT businesses will be eligible to access a $10,000 grant, followed by an additional $10,000 grant under matched funding to complete permanent physical improvements to its land and/or building.
NT – Small Business Survival Fund - Closed
Under this $50 million fund, eligible NT businesses will be able to apply for an immediate survival payment of between $2,000 and $50,000 to offset immediate cost pressures, and a rapid adaption payment between $1,000 and $5,000 to help in making adaptive changes to the new environment.
WA – Local Capability Fund
Grants of up to $500,000 supporting SMEs to increase their capability and competitiveness in major WA projects.
Facebook Small Business Grants Program
This program offers a $100 million pool of funding for distribution to 30,000+ businesses dealing with the economic impacts of the coronavirus pandemic in 30+ countries.
Indigenous Business Relief Package
Funding of up to $100,000 is available to help indigenous businesses recover from the impact of COVID-19.
For further information on the R&D Tax incentive and how it can help your business, please contact a member of our R&D Tax Incentive team.
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