If you’re the owner of a company that, unbeknown to you, conducts research and development (R&D) which could qualify for tax incentives – to the tune of 45 cents for every dollar spent – now’s the time to explore how much tax money you might be leaving on the table.
There are countless companies across Australia that periodically end up performing 'innovative and incremental' development, which, subject to certain criteria, is eligible for R&D tax dollars they’re simply not claiming.
Grouped Turnover R&D Tax Incentives
For companies with a grouped turnover of greater than $20m (globally), the R&D Tax Incentive program provides a 40% tax credit (equating to a 10% benefit on top of the standard 30% tax deduction). So for $500k spent on eligible R&D, there is the opportunity claim an additional $50,000 to reduce your tax payable or increase tax losses going forward. For smaller companies with a grouped turnover of less than $20m, there is a more generous 45% refundable tax credit which provides up to 45c back per $1 spent on eligible R&D.
The R&D Claim process
Typically, the R&D claim process involves looking at areas of your business where R&D projects may have been undertaken.
Broadly, this relates to activities:
- where the outcome could not be known in advance on the basis of current knowledge or experience
- where a progression of work took place, from hypothesis, to experiment, observation, evaluation and conclusions
- work generates new knowledge in the form of new products, materials, processes, services, methodologies etc
Innovation is a common misconception in R&D Eligibility
Many company owners may assume that they need to operate in an innovative industry to be eligible to claim.
However, companies across all industries may be undertaking eligible R&D activities. Those involved in software development, chemistry, agriculture, pharmaceuticals, clean technology, renewable energy, and mineral science developments are amongst those sectors most at risk of missing out on R&D claims. Companies in industries such as construction, property and engineering may also be undertaking eligible activities.
For example, these companies may be undertaking the following activities as part of their ordinary business activities, each of which may be considered eligible R&D activities:
- Development of improved site remediation methods
- Development and trialling to achieve improved energy efficiency
- Development of new or improved noise reduction techniques
- Development of commercial or residential projects incorporating unique and leading edge design elements, such as facades, water systems, piles or back-propping.
- Investigations and trials as a consequence of adapting new or non-industry standard technology or materials.
If you believe there is a possibility that your company undertakes eligible R&D activities, time is ticking. The cut-off date for lodging R&D tax claims is the 30 April 2017.
Please get in touch if you would like to explore the possibility for claiming R&D Tax.