Free Call: 1300 287 472
business collaboration

News and Research - AusGrant - Leading R&D Grant Writers

New ISA Report Clarifies R&D Tax Incentive Recommendations

January 30th, 2018

Today, Innovation and Science Australia released their “Australia 2030: Prosperity Through Innovation” report. The report has clarified some recommendations made during the 2016 review of the R&D Tax Incentive program which have not yet been responded to. The reviewers were asked to find opportunities to improve the R&D Tax Incentive programme, where they found that it fell short of meeting its goal of additionality and spillovers.

The ISA report clarifies proposed cost control recommendations made during the R&D Tax Incentive review. It stated that the cap on refundable offsets is proposed to operate, whereby a cap of $4M per year would apply and a maximum cumulative refund of $40M per company should apply.

The suggested “intensity threshold” for large companies would apply so that all R&D expenditure is claimable once a trigger set at 1 percent of a company’s total R&D expenditure is reached. This means a company’s R&D expenditure would need to equal at least 1 percent of their total business expenditure in order to be eligible to claim.

The report has recommended increasing business R&D by better targeting the R&D Tax Incentive towards SMEs, as they rely so heavily on the incentive (54 percent of SME’s R&D decisions are influenced by the R&D Tax Incentive vs. 34 percent for larger companies). It also proposed concentrating on direct initiatives such as increasing funding for the Export Market Development Grant and reducing support for indirect measures like the R&D Tax Incentive. Compared with many other countries, Australia has a particularly high percentage of government funding going towards indirect rather than direct R&D incentives. In Israel, Germany and Sweden, government funding is entirely dedicated to direct funding.

Furthermore, the report suggested increasing the collaboration between industry and the research sector by introducing a collaboration premium of up to 20 percent in the R&D Tax Incentive, as discussed in the review. Collaboration is a recurring theme in the R&D conversation. While we have a strong research sector globally, successfully commercialising this research requires further work.

The full report is available here.

No Change to the R&D Tax Incentive in 2017 Federal Budget

May 10th, 2017


Last night the federal budget was announced and the proposed cuts to the R&D Tax Incentive, proposed in a report by Bill Ferris, Alan Finkel, and John Fraser, did not go ahead.

The biotech industry has been particularly concerned about the recommendations, which included a $2 million cap on rebates for companies making less than $20 million a year. This was feared to potentially impact clinical trials and biomedical research commercialisation, particularly for smaller companies. AusBiotech CEO Glenn Cross has said the changes would “severely damage Australia’s burgeoning medical technologies and pharmaceutical sector.”

Although the government was to respond to the report by early 2017, there is still a possibility that the cap will go ahead in the next budget, once the new Minister for Industry, Innovation and Science has settled in.

The budget disclosed that 15,750 entities had registered to claim the R&D tax incentive in the 2016-17 FY, which amounted to $19.2 billion of R&D expenditure. Changes to business included a $7 million increase in the Business Research and Innovation Initiative and a $100 million advanced manufacturing fund to help companies diversify.

However, the start-up community feels that the budget lacked funding for entrepreneurs, despite the government’s National Innovation and Science Agenda. Nazar Musa, CEO of Medical Channel, said that “Any focus on start-ups would have supported tech entrepreneurs, or at least slowed down potential talent leaving Australia and going to the States or Europe. Now, without any further government support, this talent may not come back.”

Furthermore, Tony Wu from Weploy commented that “If we want to create businesses of global scale, global reach and solve global problems, we need to create much stronger policies to support this. This budget shows how much tech is talked about but not properly backed up. We need more action, and action means cash.”

Since its introduction in 2011, the R&D Tax Incentive has brought more R&D investment to Australia, which has strengthened industries and created skilled jobs. To see whether your company qualifies for the R&D Tax Incentive, contact Ausgrant for a free assessment.

Claiming the R&D Tax Incentive for International Activities

June 29th, 2016

GlobeThe R&D Tax Incentive is one of the most effective methods of support for research in Australia and provides companies with up to 43.5 cents back for every eligible dollar – even in cases where start-up firms aren’t yet paying tax. Start-ups can indeed qualify for the incentive too. In essence, any firm developing or improving products, processes or software, for example, may be eligible.

However, one of the key features of the R&D Tax Incentive is that activities usually concern only R&D activities conducted in Australia. Despite this, in particular circumstances, companies can claim the incentive for activities undertaken overseas.

It is important to note that whilst companies may be able to claim overseas activities, this is typically only reserved to support companies that can prove they could not have conducted the R&D locally.  In addition, the deadline for these applications is different – firms must apply within the same financial year as the activities were undertaken.

To elaborate, overseas R&D is classified by the location of where the R&D activity was undertaken. For instance, in software development, this usually means where the developer is sitting in the world when they undertake R&D. This means that even if an Australian company employs the developer and they are a resident for tax purposes, the R&D would still be overseas-based if they happened to be overseas at the time that they created it. This is a region that you need to be particularly cautious of when employing development contractors who may employ overseas developers or outsource development overseas.

In cases where a company wants to claim notional deductions for overseas R&D activities, then they must pass a positive ‘Advanced Overseas Finding’ by AusIndustry.  To provide context, an Advanced Finding is a binding decision from Innovation Australia about the eligibility of a company’s activities under the R&D Tax Incentive. It operates similar to a private ruling request and has the intention to provide certainty for companies. Similarly, an Overseas Finding is a binding decision that relates to overseas activities and expenditure. There are specific rules surrounding the inclusion of overseas expenditure within a company’s Australian R&D Tax Claim. Notably, June year end companies intending to claim overseas costs in the current year’s R&D claim must submit the activities relating to those costs through an Advanced Finding by 30 June.

As can be seen from above, the many rules and regulations adjoining overseas R&D activities may be perplexing for some. Therefore, a company may wish to seek external assistance to help identify their R&D eligible activities and avoid inaccurate judgements. If you think your company may be eligible, have a chat to our R&D tax specialists who will be able to answer any further questions or help you make your claim. The earlier you get the ball running and submit your application, the sooner your company will receive their refund.

Key EOFY Implications for the R&D Tax Incentive

June 24th, 2016

Over the last twelve months there has been substantial activity in respect to the research and development (R&D) tax incentive with various announcements broadcasted by AusIndustry and the Australian Tax Office (ATO), as well as the release of the National Innovation and Science Agenda (NISA).  We’ve moved from a mining-led economy to one which is increasingly driven by technology and innovation. Consequently, this has led to an increased focus on the R&D tax incentive.

In light of this, to keep you informed with the developments regarding the R&D tax incentive, we’ve provided important information regarding the R&D Tax Incentive and the End Of Financial Year (“EOFY”) which falls on 30 June.

The following R&D tax claim information will apply to companies that:

  • have recently submitted a 2015 R&D claim; and
  • intend to submit a 2016 R&D Claim.

Payment of R&D Expenditure to Associates

  • Companies intending to submit a 2016 R&D Claim must pay any R&D expenditure incurred to associate entities before year end (i.e. 30 June).
  • Where a company incurs R&D expenditure from associates that is not paid by the end of the financial year, the company is able to carry forward the amount and claim as R&D expenditure in subsequent years when the item is paid.

Increased Compliance Activity

  • AusIndustry will likely start compliance activity for FY15 applications that were lodged around the April 30 deadline. If you are concerned about an Audit, see our blog on the topic, which clarifies what to expect.

Claiming Overseas Expenditure 

  • Companies intending to claim overseas activity costs in their FY16 R&D Tax Incentive claim must seek approval to claim these costs by lodging an Overseas Finding Application before the end of the financial year.

If you have any further questions on the R&D tax incentive, please do not hesitate to contact one of AusGrant today.

Is Financing Innovation a Major Factor of Success?

June 10th, 2016

Undeniably, we live in the so-called “digital age”. Innovation has formed an important role in our modern society and has been touted as the blueprint for success by the Turnbull government. It plays a key role in medical and environmental improvements, and by its commercialisation, the digital industry also has the potential material economic impact. Thus, it is crucial to fully understand innovation’s drivers and processes – from both a socio-economic and a business perspective. Within this scope, adequacy financing the major players of this industry, the predominantly young and highly-innovative companies, is a major factor of success.

Furthermore, empirical evidence shows that start-up firms play a vital role in the advancement of the digital industry, mainly due to their function of serving as a technology transfer mechanism to bring research from the academia to the marketplace. In fact, according to PWC, the Australian tech start-up sector has the potential to contribute $109 billion, or 4% of GDP, to the Australian economy and 540,000 jobs by 2033. Irrefutably, it is widely recognized that high-tech start-ups are a major source of new innovations and the very nature of innovation is that it involves, research, experimentation and development. Thus, leveraging the outputs of high- tech research and development (R&D) is key in the creation of a successful Australian start-up ecosystem.

However, access to finance remains a key bottleneck for SMEs that are undertaking research and development. As a result, majority of the governments around the world incentivise start-ups to undertake R&D activities through tax breaks.  This is because it is recognised that R&D often coincides with innovation and productivity, which essentially drives nations forward by solving problems and creating opportunities.In Australia, the government provides a lucrative incentive to companies undertaking R&D work in the form of the R&D Tax Incentive.

To elaborate, the incentive helps by offsetting some of the costs of performing R&D. For instance, if your business turns over less than $20 million in revenue and you are in a tax loss position, then up to 43.5% of your eligible R&D expenditure with be refunded by the Government in the form of annual cash rebates. This means real working capital for a project and cash flow for a business, so the focus can be on developing a product without the pressure of needing funding.

As noted above, the refundable component applies to businesses making a loss, which many tech start-ups originally will be. Most importantly, these companies receive it back as cash – which is exactly what a start-up needs to help get its business off the ground. Nonetheless, the benefit also comes in the form of tax credits for businesses making a profit.

On the whole, the R&D tax incentive is designed to encourage investment by Australian businesses in R&D, and it works. Knowing those companies will receive this money back at the end of the year allows them to invest more in R&D than they would otherwise. Without continued R&D, firms risk losing both reputation and competitive positioning in the market, and could gradually decline through failure to invest in new products, technologies, and processes.

Contact AusGrant today if you would like more information on the R&D Tax Incentive and what this could mean for your business.

CSIRO’s New Report Pushes Further for Innovation & R&D in Australia

May 27th, 2016

Australia’s colonial and federal past, its geographical segregation, huge land mass and a small population have vastly influenced the country’s industries, technologies and research institutions. This resource-rich history led to what is more frequently known as the ‘mining boom’. In light of this, Australian industrial research and development (R&D) in the second half of the nineteenth and early twentieth centuries was largely focused on the agriculture and mining industries.

With the mining sector set to slow down in 2016, Australia is now endeavouring to improve resources, technology and innovation. To that end, the CSIRO has recently released a report that creates an all-encompassing road map of global outcomes for the next 15 years.

Publicised this week, the report titled Australia 2030: Navigating our Uncertain Future, outlines four probable scenarios constructed on pre-existing modelling, scientific data and an array of notorious global trends.

Essentially, the report is a blanket of opportunities when it comes to the future of geopolitics, global weather, resource allocation, population shifts, trade, biosecurity, health, emerging technologies and industry developments by the year 2030.

In regards to research and development (R&D), the reports describes that technological innovation, driven by research and development (R&D) investment, contributes around 50 percent of GDP growth in developed countries. As the report words it, “this is the ‘innovation imperative’.” In a progressively interrelated and rapidly fluctuating world, Australia risks being left behind if it fails to innovate, build innovation capacity and invest in R&D.

To put in context, the report highlights that there is a significant innovation gap in Australia. The 2015 Global Innovation Index ranked Australia 10th in the world for innovation inputs but 72nd for innovation efficiency. Furthermore, Australia ranked last in the OECD for research-business collaboration, and our relative rankings for STEM education are in decline.

Overall, to build our future in Australia, we must understand the impending challenges and leverage our research sector to transform those challenges into opportunities. As Australia barrels towards an election on July 2, major parties have been announcing excerpts of their policies as time passes. Thus, whether or not the suggestions outlined in the report will be observed in future policy is yet to be known.

However, in the interim, one currently available tool for accelerating productivity and cash flow is the research and development (R&D) tax incentive. In effect, more than $18 billion of R&D expenditure was registered for 2013-2014 nationally according to the Australian Taxation Office. Nonetheless, the incentive is actually rather undersubscribed and is claimed by only 13, 600 companies per annum. This is particularly surprising as approximately 2 million entities could be eligible for the incentive. If you think you may be eligible, contact one of our specialist R&D Tax consultants to find out more about the scheme.

The Future of Research and Innovation in Australia

May 18th, 2016

A federal election approaches and, with it, a window of opportunity for propitious conversations about potential future directions for Australia as a polity, a society, a culture, an economy. Most recently, public jargon has been littered with references to innovation, digital disruption and collaboration. Conversations have predominantly been led by Malcom Turnbull and the release of the Innovation Statement in December 2015. However, the Australian Parliament’s Trade and Investment Growth Committee have also just released a report exploring Australia’s innovative future.

The report, titled Inquiry into Australia’s Future in Research and Innovation, investigated how the research and innovation sector can better assist in conquering Australia’s key economic challenges. The fundamental points relating to the research and development (R&D) tax incentive explored in the report have been discussed below.

To begin with, a key concern emphasised in the report is the collaboration between universities and business. In reaction to this apprehension, the committee recommends that the Department of Education and Training review overseas models of university-business collaboration and consider which strategies could be introduced in Australia. The report revealed that several university bodies reinforced adapting the R&D tax incentive scheme to embolden greater cooperation between businesses and universities.

Nonetheless, the report noted positive growth in regards to research spending. In specific, the report outlines in 2015–16, the Australian Government spent $9.7 billion on science, research and innovation. Of this, the R&D tax incentive measures amounted to $3.2 billion. Professor Roy Green stated that the R&D tax concession had ‘increased from about 15 percent to about 30 percent’ of the overall research and innovation spend.

Furthermore, Australia’s gross spending (government, business and university spending combined) on R&D, equates to 33.5 billion and 2.12 per cent of Australia’s GDP. While Australia’s spending is above the OECD average of 2.02 per cent, countries with strong international reputations for innovation spend a minimum of 3 per cent of GDP on R&D per annum. Independently, Australian business spent $18.8 billion on R&D in 2013-14, which amounted to 1.19 per cent of Australia’s GDP. In the same period, Australia’s higher education sector spent $9.6 billion on R&D, which amounted to 0.63 per cent of Australia’s GDP. As a percentage of GDP, Australia’s R&D spending by business and the higher education sector ranked 15th and 8th, respectively, amongst the OECD countries surveyed.

Thus, as noted above research and development occurs in universities and in businesses – but there remains little connection between the two. Cultivating a partnership between businesses and universities is important and could certainly help bridge the gap between research and proven technology. University and corporate partnerships, driven through tax breaks or other integrated models, could ensure investment in research and innovation in Australia does not get left behind in a competitive international market. Nevertheless, the increased spending on research outlined in the report, as well as the release of the $1.1 billion National Innovation and Science Agenda, indicates that Australia is observing an improved focus on innovation.

If you’ve invested in Research and Development(R&D), contact us today to see if your eligible for the government’s R&D Tax Incentive.

Small Businesses Linked to Surge in R&D Spending in Australia

May 13th, 2016

New findings in the federal budget papers reveal that small companies spend more of their revenues on research and development than large ones.

To be precise, the budget papers attribute the surge in spending on R&D to more activity by companies with turnover of less than $20 million. The federal budget also forecasts that the spending on R&D will jump from $2.9 billion in FY15-16 and FY16-17 to 3.9 billion in FY19-20.  These figures are approximately double the forecasts that were outlined in the 2014 budget, which proposed to cut the R&D tax incentive offset from 45 per cent to 43.5 per cent for firms with turnover of less than $20 million, and to 38.5 per cent credit for larger firms.

The jump in R&D spending can largely be attributed to the R&D Tax incentive, which encourages companies to take the risk in conducting R&D activities to improve their businesses. In certain cases the incentive entails a 45% cash back on eligible R&D projects and it is great opportunity for Australian companies to invest in their own products or services.

Aside from the R&D tax incentive, the surge in R&D by small firms is being driven by post-mining shift and the lower dollar making local research more competitive. Digital disruption, in particular, is having a large impact on the shift. Essentially, disruptors redefine markets by introducing new products and services that, while not immediately as sophisticated as currently available product, offer other benefits such as simplicity, convenience and lower prices and that appeal to new, less demanding customers. Over time, these new products gain a foothold and improve in quality and eventually set a new benchmark for the minimum viable product that defines a category.

In summary, the figures outlined in the budget papers reveal the impact that the R&D tax incentive can have on R&D spending for small companies. However, the R&D Tax Incentive is a frequently overlooked opportunity for smaller companies, with many SMEs mistakenly believing this is exclusively for large corporations or those engaging in ‘white coat research’. By capitalising on these prospects, companies can produce generous tax savings, including generating cash for their past and future investments or developments. Overall, it is great opportunity for Australian  companies to invest in their own products or services and get up to 45% cash back on their investment when they lodge their next tax return (i.e. if their aggregated turnover is less than $20 mil per annum). Don’t miss out on generating cash benefits for your research investments this tax season.

Contact AusGrant today if you would like more information on how the R&D Tax Incentive works and if you qualify.

Does the 16-17 Federal Budget Impact the R&D Tax Incentive?

May 5th, 2016

In a bid to broaden the economy away from a reliance on mining, the Australian government launched the National Innovation and Science Agenda (NISA) last December. The Australian Federal Budget for 2016-17 released on Tuesday night reaffirmed several elements of last year’s $1.1 billion innovation statement. Whilst the budget did not state any meticulous changes to the R&D tax incentive, a number of other changes have the potential to complement local R&D activity.

Most notably, under a 10-year plan, the corporate tax rate will decrease for all companies from 30% to 25%. From 1 July, the small business tax rate will be cut by 1%, creating a figure of 27.5%. In addition, the turnover threshold for small businesses able to access a reduced tax rate will be increased to $10 million (currently companies under $2 million tax rate of 28.5%). The proposed changes to the corporate tax rate will therefore affect the permanent R&D benefit (R&D tax offset rate minus corporate tax rate) for companies with less than $10 million.

Therefore, the proposed figures for companies under $10 million would be:

  • R&D Tax Offset Rate (45%) – Proposed Corporate Tax Rate (27.5%) = Permeant Benefit (17.5%).

This ultimately results in a 1% increase in permanent benefit when compared to figures with the current corporate tax rate. To clarify, the current figures are as follows for companies under $20 million:

  • R&D Tax Offset Rate (45%) – Current Corporate Tax Rate (28.5%) = Permeant Benefit (16.5%).

Furthermore, on Wednesday morning the Senate in Canberra confirmed two new tax incentives to encourage early-stage investing. The measures – the Tax Incentive for Early Stage Investors and New Arrangements for Venture Capital Limited Partnerships – will now be in place for the 2016-17 financial year. The Tax Incentive for Early Stage Investors brings tax concessions to eligible early stage investors who invest in qualifying companies, including a capped 20% non-refundable tax offset and 10-year capital gains tax exemption for investments. The New Arrangements for Venture Capital Limited Partnerships brings a raft of changes aimed to improve access to capital and make investing in venture capital easier and internationally competitive, according to the Government.

In summary, the stability of the R&D tax incentive scheme in the federal budget will no doubt come as a relief to many companies, as the current programme provides a high level of encouragement for companies to engage in R&D and is a broad-based, easily accessed and significant Incentive. Moroever, the lower corporate tax rate and new tax incentives are a welcome change for Australia’s innovative community.

If you have any further questions on the R&D tax incentive, please do not hesitate to contact one of AusGrant today.

R&D Registration Deadline Extended to Today

May 2nd, 2016

clock_imageAs April 30 was a Saturday this year, companies are still able to lodge the registration of their R&D activities today (Monday 2 May 2016). To claim the incentive, you need to register your R&D activities with AusIndustry within 10 months of the end of the final year. For most companies operating in June – July fiscal year, this date traditionally falls on the April 30 deadline. However, as noted above, since this was on a Saturday, companies are able to lodge on Monday 2 May 2016.

If you intend to register and claim the R&D Tax Incentive, you must keep adequate records to demonstrate to the ATO and AusIndustry that you did carry out eligible R&D activities and that you did incur eligible expenditure. With higher levels of review activity and scrutiny by AusIndustry and the ATO, it is vital that companies are able to substantiate their R&D claims with contemporaneous documentation.

Nonetheless, registration is the critical first step in accessing the R&D Tax Incentive. In order to be able to claim the benefits of the R&D Tax Incentive, a company must register their R&D activities with AusIndustry. These activities can either be classified as core R&D activities or supporting R&D activities. Core R&D activities are the experimental activities undertaken to generate new knowledge. Whereas, supporting R&D activities are the activities that relate directly and support your core R&D activities (e.g. literature searches).

By capitalising on the opportunities that the R&D tax incentive offers, companies can produce generous tax savings, including generating cash for their past and future investments or developments. In addition, there is no cap on the level of eligible R&D expenditure that a company can claim. Companies with annual turnover of less than $20 million can claim the 43.5% tax offset on all their eligible expenditure. Those with annual turnover of more than $20 million can claim a 38.5% tax offset on all their eligible expenditure.  However, to claim these benefits a company must register their activities by today. Don’t miss out on generating potential tax savings for this financial year.

AusGrant specialises in the R&D Tax Incentive – contact us today to discuss your eligibility and learn more about how the R&D Tax Incentive may benefit your business.