R&D Tax Incentive Program
The Valley of Death is a phase that all start-ups must overcome on the road to success. There are many ways for start-ups to successfully negotiate the valley of death, one of which is leveraging on government grants and incentives available to companies. In this day and age, the government is strongly encouraging us to embrace the ‘Ideas Boom’. Why not take advantage of the incentives and grants available? The Australian government supports companies who invest in research and development through the R&D Tax Incentive Program. Projects that involve novel application, security, data management and middleware development, software engineering, artificial intelligence and theoretical computer science, and programming languages and other development projects are all potentially eligible candidates for the R&D Tax Incentive Program. Eligible R&D activities could qualify for a 45% Refundable offset.
Access to the 45% refund is restricted to those companies where ‘grouped’ turnover is less than $20 million per annum (companies with a turnover in excess of this amount will only be eligible to claim the 40% non-refundable R&D tax credit).
Essentially your $45k minimum viable product could end up costing only $25k with the refundable offset. A $20k saving is definitely worth your research and that saving could go towards your marketing.
You could speak to your accountant about applying for the incentive program but beware, there’s many potholes they will need to negotiate and you might jeopardise your grant before you even have the first line of code written.
I would suggest meeting up with any of the many R&D tax professionals who specialise in this rather than normal day-to-day tax accountants. A quick Google will bring up half a dozen. They usually specialise in a wide variety of other government business grants too, including early commercialisation through the Accelerating Commercialisation Program, and developing a market for your end product through the Exports Markets Development Grant.
I usually work closely with my clients to understand at an early stage whether or not their idea is eligible for the R&D Tax Incentive Program by having a meeting with them and an R&D tax professional. That way I’m able to help my client explain in technical detail the ‘mechanical’ ins and outs of the mobile application.
There is a plethora of incentives available to new start-ups and it’s important you get on to them as soon as possible. Unlike other grants the R&D Tax Incentive Program has an annual registration process and registration lodgements are due by no later than 10 months after the company’s income year end. For example, companies with a year end of 30 June 2015 need to have their registration lodgements ready by 30 June 2016.
Call me directly on 1300 277 769 to discuss your start-up and the R&D Tax Incentive Program.
I have put this article together with the help of R&D tax professionals Lisa Chamberlain and Alvin Lim of Ernst & Young. Give them a buzz on 08 9429 2333 or 08 9429 2441 respectively for an obligation free discussion.
