Has coronavirus impacted the R&D Tax Incentive – what claimants need to know

Tax Insights

The short answer is, not much.
While COVID-19 wreaks havoc on humankind and the economy alike, the R&D incentive may just be the silver lining in a coronavirus shaped cloud.

For starters, the Senate Committee considering controversial proposed changes to the R&D Tax Incentive are now facing a 5-month extension. With Senate’s report due to be handed down in April, the deadline has now been extended to August when Parliament will most likely resume.

Coupled with a well backed campaign calling for changes to be postponed and reviewed following the full impact of COVID-19, the proposed legislation may well be on shaky ground.

In addition, at a time where ‘cash is king’ has become a war cry, the R&D benefit is imperative for businesses that are scraping to succeed.

2019 and 2020 R&D Claims

Companies seeking to claim the incentive must lodge their R&D application within 10 months from their financial year-end.

Companies seeking to claim the incentive must lodge their R&D application within 10 months from their financial year-endCompanies with a 30 June year-end have until 30 April the following year to lodge their R&D application, the April 30 R&D tax incentive lodgement deadline is fast approaching.

AusIndustry has come to the party offering an extended lodgement date of 30 September 2020. While this seems a generous offer, the reality is (aside from claimants needing to meet certain hardship criteria) delaying lodgement is just delaying any potential benefit to which the company may be entitled.  It is also likely to delay the preparation of a future 2020/21 R&D claim.    

Companies carrying out R&D activities during the current 2019/20 financial year and anticipating an R&D cash rebate when they lodge their 2020 income tax return should be diligently using this period of social isolation to ready their claim in order to lodge at 1 July 2020 to receive the cash rebate as soon as they can.

This opportunity may actually have the additional benefit to those companies eligible for the cash refund by bringing that refund into the company in the first half of the 2020/21 financial year – this boosts company cash flow when it is needed the most.

While lodging an R&D application may be a seemingly low priority for some in the current environment, it is important to note that the R&D tax incentive refund, for companies meeting the cash refund criteria, is a cash payment directly to the company.

R&D Tax Incentive finance options

Something further to be mindful of is the number of finance providers offering companies the opportunity to debt finance against their current year’s R&D Tax rebate.

Effectively rather than wait to receive the R&D cash rebate after the end of the financial year, a company can seek debt funding against what they have already incurred during the year, bringing cash into the business as soon as possible.

So, the message, amidst all the uncertainty, is that claiming your R&D cash rebate should remain on your business as usual schedule and likely be a higher priority.


Have additional questions about the R&D Tax Incentive?

It is recommended that businesses speak to their RSM R&D adviser as they are monitoring the ever-changing environment and are able to provide clients with the best current and long-term options.
Please get in touch with your nearest RSM Office

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