The R&D Tax Incentive program is great for startup companies.
Why? Let us explain.
One misunderstood aspect of the R&D Tax Incentive is that there is no requirement for the R&D to lead to commercial or even technical success. As long as you attempt to generate new knowledge via an experimental process, you could have eligible R&D under the R&D Tax Incentive.
The R&D may never lead (at least not directly) to a successful product. The technical objectives of the R&D may not even be met. The experiments themselves may not even be successful. As long as you have a plausible hypothesis or theory that you are evaluating with your experimentation and providing that you are generating new knowledge due to that experimentation, you could have eligible R&D.
If you run a startup company and do R&D, you owe it to yourself to investigate the R&D Tax Incentive program – it can be an important source of additional R&D funding for you.
The startup situation
This suits startups nicely, of course, because the focus of many startups is a new concept, innovation, or some new piece of technology that doesn’t currently exist. Many startups go through a series of technical failures before they identify a workable approach. Some, in fact, are never successful. There is a high level of risk involved.
The R&D Tax Incentive aims to encourage companies to undertake R&D that might otherwise have been considered too risky to do without the program’s financial support.
Many startups are also typically a long way from commercial success, and often take years to achieve technical success, never mind commercial success.
For companies with a turnover of less than $20m (most if not all startups), the benefit is 43.5% of the eligible R&D expenditure. All startups make a loss because there is no product – just expenses. That means that the benefit is paid as a tax refund, which can then be used to fund future R&D.
Where the R&D Tax Incentive is different
Unlike other assistance programs provided by the Australian Government, with the R&D Tax Incentive, you aren’t competing with other applicants for your benefit – if you qualify, you get a benefit. There is no fixed amount to distribute. That makes the R&D Tax Incentive different to other Government assistance programs where the program is often closed when the funding runs out.
The criteria for the R&D Tax Incentive is also well-publicised and not subject to the ‘discretion’ of the Government.
The R&D Tax Incentive is, however, not a grant – it is (taxation) entitlement. You need to spend the money on the R&D upfront and then claim it back as a tax refund or tax credit. This means that your refund is not guaranteed. This may or may not be an issue, depending upon whether you are relying on the R&D Tax Incentive for funding the next step – many startups are.
Note that there is no guarantee that your R&D Tax Incentive application is compliant just because you do receive your benefit. The R&D Tax Incentive is a self-assessment program – you are asserting that your application is compliant. AusIndustry can review your application later, and ask you to repay the benefit if they deem the application non-compliant.
This makes it important to seek professional advice from a qualified R&D Tax Incentive consultant.
Where an R&D Tax Incentive Consultant comes in
You should consult a competent R&D Tax Incentive specialist before you embark on R&D that you intend to claim under the R&D Tax Incentive.
Why? Several reasons. Typically not all your R&D will be eligible under the R&D Tax Incentive, so you must identify the potentially eligible R&D upfront so that you can keep adequate technical and financial records of this R&D to support your claim.
A competent R&D Tax Incentive consultant can help you identify the potentially eligible R&D before you start that R&D, and advise you on what records you need to keep. Attempting fill in gaps in your documentation later will be much more difficult, and in fact, cannot be done after the end of the financial year in question.
If you leave it until after the end of the financial year before talking to an R&D Tax Incentive consultant, you will be limited by the documentation that already exists. That will limit what R&D you can legally claim.
Tech Abstract’s commitment
To have confidence in any R&D Tax Incentive application, you need to engage an R&D Tax Incentive consultant which solid technical skills and industry R&D experience. This particularly applies to startups where the R&D is likely to be highly technical and specialized.
Tech Abstract only contains technical specialists with STEM (Science, Technology, Engineering, Math) qualifications, solid technical skills and extensive experience with R&D in industry.
If we take on your R&D Tax Incentive application, you can be confident that you have a solid and compliant application. Tech Abstract has never had an unsuccessful review of an R&D Tax Incentive application, and we will stand behind any R&D Tax Incentive application we make on behalf of our clients.
You only pay for our services when you receive your benefit, so there is financial commitment upfront.
If you run a startup and have potentially eligible R&D, there is absolutely every reason to talk to Tech Abstract about an R&D Tax Incentive application.