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The conclusion of an AAT case dealing with the R&D Tax Incentive was released on the 22nd of January 2016, highlighting the increased audit and compliance activity by Innovation Australia and the Australian Taxation Office in this area.

The case of JLSP and Innovation Australia [2016] AATA 23 predominantly dealt with whether the R&D activities of the claimant company were conducted for the purpose of generating new knowledge as required by the definition of ‘Core R&D activities’. The definition of ‘Core R&D activities’ can be found in section 355-25 of the Income Tax Assessment Act 1997, which clearly creates a ‘purpose test’ for R&D activities.  Specifically, the case sought to evaluate whether a clinical trial carried out in accordance with a contractual agreement was conducted for the purpose of generating new knowledge.

Innovation Australia declined to make an advance verdict that the taxpayer’s clinical trial was a core R&D activity. It said that the only significant purpose of the trial was to perform specific services to accomplish their contractual obligations.

The AAT rejected Innovation Australia’s submission on the foundation that the trial satisfied the definition of “core R&D activity” in s 355-25(1) because it was an experimental activity for the purpose of discovering something unknown or testing a principle and that the outcome of the activity could not be determined in advance. The AAT also rejected the argument that the purpose of generating new knowledge must be the dominant or prevailing purpose. Rather, the AAT considered that the “purpose of generating new knowledge must be more than an insubstantial purpose and must be substantial enough to enable the activity to be accurately characterised as conducted for that purpose.”

Essentially, the learnings from this case are:

• R&D entities must be capable of showing the purpose of each core R&D activity. The plan, execution, measurement of results and the response must show that R&D was “more than an insubstantial purpose” yet it does not need to be the purpose that outweighs all others.
• R&D can be undertaken in a commercial context and it is possible for an R&D activity to be a business as usual activity as long as the R&D entity can show a substantial purpose for each core R&D activity is to generate new knowledge.
• An activity must be conducted for the R&D entity or for an associated foreign company. If the later, then proper agreements need to be in place.

Should you wish to discuss the elements of the R&D Tax Incentive further, contact AusGrant today.

In order to attract entrepreneurs to our shores and better combat the ‘brain drain’ that sees technology workers take their skills overseas, Australia is seeking to tweak its visa system. In specific, the government aims to do this with the implementation of a new entrepreneur visa.

Under the new National Innovation and Science Agenda, Malcom Turnbull has announced new visa pathways for innovative entrepreneurs. The efforts come as result of Australia’s constant low rankings among global innovation standards.

This new visa category will allow overseas entrepreneurs with innovative ideas to apply for a provisional visa with a pathway to permanent residency upon fulfilling criteria such as business growth and creation of jobs. To qualify for the Entrepreneur visa, individuals will have to:

• Gain financial backing from a third party, which will likely be assessed by the newly created Innovation and Science Australia (ISA)
• Possess an innovative and high-growth potential idea that can be implemented in Australia

The new Entrepreneur Visa is planned to be introduced in November 2016.Thus, whilst it is still some time away before the changes take place, the modifications proclaimed look to advantage aspiring migrants and international graduates who want to make Australia their home. By enticing high-calibre and innovative entrepreneurs, Australia’s innovation principles can only advance while local jobs and investment will escalate as a result.

In the interim, other ways to support innovation in a country is through tax breaks. For instance, the R&D Tax Incentive is the biggest scheme in Australia that aids businesses participating in research and development. Over $1.8 billion is granted annually and it is not competitive – in other words, if you are eligible then you are permitted to it. The classification is deliberately comprehensive as the Government wishes to support R&D across various business and industry sectors. AusGrant provides guidance on what undertakings are eligible and facilitates you to comprehend the business benefits and key features of the offset. Contact us today to find out more .

In transition from the mining boom to an ideas boom, Turnbull released the Innovation Agenda in December 2015. As we previously mentioned, there was no indication of any immediate changes to the R&D Tax Incentive in the agenda. However, it was noted that the Australian government would be piloting a review of the R&D Tax Incentive to make it more available to the business sector.

At the present time, the review is currently proceeding and is expected to be reported to government in April 2016. The review will seek to pinpoint opportunities to improve the effectiveness of the programme and encourage additional R&D expenditure in Australia.

To assist with this review, An Issues Paper (PDF 611KB) has been established by a panel of professionals to support the evaluation process. The panel comprises of  Mr Bill Ferris AC (Chair of Innovation Australia), Dr Alan Finkel AO (Australia’s Chief Scientist) and Mr John Fraser (Secretary of The Treasury). In short, the Issues Paper explores the government programme and current performance, as well as policy design issues and policy rationale.

Aside from this review by the panel, now is the perfect opportunity for interested parties and individuals around Australia to have their say on the R&D Tax Incentive. Additional input is due by close of business Monday, 29 February 2016, and should be sent to:

R&D Tax Incentive Review Secretariat
GPO Box 9839
CANBERRA ACT 2601
E-mail: R&DTaxIncentiveReview@industry.gov.au

It is important to note that industry professionals are unaware of when the timing of any changes to the R&D Tax Incentive will take place – as this is purely a task for government.  As described above, the review is currently ongoing and is projected to reach the government in April. Nonetheless, AusGrant will aim to stay on top of any changes as they happen and update our clients as needed. In the meantime, however, companies are still encouraged to engage in R&D. As the incentive presently subsists, companies may be eligible for generous tax benefits. Contact us today to find out more about the incentive and if you qualify.

“The Lucky Country” – the expression has single-handedly become shorthand for describing our weather, our lifestyle, and our history. First coined by Donald Horne in a rather sarcastic manner in 1964, the book has gone on to become a cult classic, as well as trademarking Australia with a nickname.  Although, is it time we departed from our good fortune and became more competitive instead?

Traditionally, when public discourse states the need for Australian firms to be more competitive, it usually refers to the government implementing policies that make it easier for firms to compete with their foreign rivals. However, this is not quite what economists propose when they say heightened competition is a key driver of improved economic performance. Rather, they mean Australian firms should be forced to improve their own performance by exposing them to greater competition with other Australian firms.

To clarify, John Fraser, the Treasury Secretary of Australia, explains that competition is at the heart of how market economies are organised. “Competitive markets generally deliver benefits for all Australians in a way that sheltered markets fail to do so,” he says. “Effective competition in our economy is a key part of its strength and dynamism. Competitive markets benefit consumers by putting downward pressure on prices … And over time, competitive pressures drive innovation and investment in new technologies and the development of new products and quality services that meet the needs of consumers. This process of innovation is what drives economic growth and improvements in living standards in the long term.”

Indeed, as can seen from the above, competitiveness certainly can aid innovation on a firm level, but can it assist innovation in Australia as a nation? For instance,  Philip Dalidakis, Victoria’s innovation minster, has been shamelessly competitive in ensnaring start-ups and innovation events from other states, having pinched the SydStart conference — to be retitled StartCon — and habitually stirring his NSW counterpart on Twitter. In opposition, NSW’s minister for innovation Victor Dominello,  called for an end to “schoolyard games” and believed competition was fruitless.

Despite this, Assistant minister for innovation Wyatt Roy has backed the Victorian government’s competitive agenda.  Roy described that the rivalry produces strong outcomes and he wants to see more competitive tension between the states. In particular, he believes fierce rivalry with the likes of New South Wales and Queensland would lead to better policy creation, and there would be room for more than one innovation hub in Australia.

As elucidated above, there is certainly a link between innovation and competition. In fact, research by Aghion, Bechtold, Cassar and Herz (2014) showed that increased competition leads to a significant increase in research and development (R&D) investments by neck and neck firms, which subsequently boosts innovation. Besides supporting the creation of new products, processes, and software, R&D can increase profits and knowledge for a company. It not only benefits firms,but  the avails of new knowledge can have positive spillover effects on the broader nation’s innovation levels. Additionally, companies can benefit further by utilising the government’s R&D Tax Incentive. Find out if you’rer eligible for the R&D Tax Incentive in our blog: How Do I Know If I do R&D & If I Qualify for the Tax Incentive?

AusGrant is one of Australia’s leading grant consultancy services, providing specialist services relating to grant submissions to federal and state government agencies.

In light of Australia Day tomorrow, we’ve looked at six Australian inventions that have had a serious impact on the world and how we operate. Although Vegemite, the wine cask, and fairy bread are clearly great leaps in innovation, here are several of the top inventions that you may or may not know came from our sunburnt country:

1. Black Box Flight Recorder

Australian Dave Warren developed the black box flight recorder in 1961 which completely transformed the airline industry. The device records voices from the cockpit and flight data, with the ability to replay the final moments before a plane crash. Today, every commercial plane in the world flies with this Australian invention.

2. Wi-fi

John O’ Sullivan and the CSIRO established wi-fi technology in 1992. Originally they were researching for black holes when they realised the potential of the technology.

3. Penicillin

Howard Florey, a scientist from Adelaide, purified penicillin from a special strain of mould. In the 1940’s he created a way for penicillin, the world’s first antibiotic, to be manufactured and processed so it could be used to treat infections in humans. The antibiotic was mass produced and used to assist victims of World War II.

4. Cochlear Implants

Dr Graeme Clark from Melbourne invented the world’s first bionic ear, a device that helps deaf people hear by stimulating the cochlea.  This invention has greatly improved the quality of life of over 50,000 people in 120 countries.

5. Ultrasound

In 1961 David Robinson and George Kossoff built Australia’s first ultrasound scanner, called the CAL Echoscope. Ultrasounds enable unborn babies to be observed and give doctors the ability to look inside bodies without surgery.

6. The Notepad

It took 500 years of human evolution for Tasmanian J.A.Birchall to change the way we look at single sheets of paper. In 1902 he decided to stick them together to form the first notepad. From starting great works of literacy to studying for a maths exam, the versatile notebook has aided us all at one point or another.

These are just a few of the inventions Australia has developed which have changed the way we operate. However, with Australia’s innovation agenda released in December last year and the nation set to embark on an ‘ideas boom’ in 2016, no doubt more inventions will be produced in the coming years. If you are researching and developing a new invention, product, process, or software, the government does offer tax incentives. The R&D Tax incentive is a government incentive to combat the cost of engaging in R&D and to encourage innovation in Australia. Contact AusGrant to day to find out if you are eligible for Research and Development Tax Incentive.

With the Turnbull Government pledging for an innovative society, the importance of research and development (R&D) has been increasingly discussed in the local community. In particular, the R&D tax incentive and its lucrative benefits have become progressively public knowledge. Despite this, however, there remains much confusion about the incentive.

Hence, in light of this, we look at the record-keeping that is needed if a company wishes to apply for the R&D tax incentive. Maintaining these documents is beneficial to companies as it will reduce the expenditure that may be associated with a compliance review. It also supports the company to conduct its work and re-visit ideas, processes and solutions in the future. Moreover, if the company wishes to commercialise its work, potential investors will anticipate having access to a comprehensive range of records.

What records should be maintained?

Companies must keep sufficient records to validate:

• They conducted eligible research and development activities
• They experienced eligible expenditure in relation to those activities
• Their R&D activities and expenditure met all other legislative requirements under the scheme

Record keeping for tax purposes:

A company’s business records must be sufficient to verify:

• The amount of expenditure incurred on R&D activities
• The nature of the R&D activities
• The relationship between the expenditure and the R&D activities. It is the company’s responsibility to satisfy the ATO of the accuracy of the method used to allocate and calculate the proportion of expenditure on core R&D activities and supporting R&D activities.

If the R&D activity is undertaken by a contractor, documents involving to the contract, the R&D activities and the project report and invoices should contain:

• The date the R&D activities are undertaken
• Sufficient detail to ascertain the amount of expenditure on the R&D activities
• A description of the activities performed by the contractor to link the fee with a particular R&D activity. Under tax law, records must generally be kept for a minimum of five years.

As can be seen from above, record-keeping is vital for companies if they are wishing to claim a tax incentive. Indeed, the details in the incentive means that there can be confusion when making a tax claim based on R&D activities. Hence, how can companies avoid errors when making a claim?

One way of escaping error is by engaging in a reputable R&D Tax Specialist, such as Ausgrant.  Our specialists will be able to support any questions you may have. If you would like any more information on the R&D Tax Credit, please contact us today to find out more.

As Australia begins a more digital journey in 2016, one that Turnbull has patented as being more innovative, the role of research and development (R&D) may become pivotal to businesses in the private sector. With this in mind, when it comes to government incentives for companies you can’t undervalue the worth of the R&D Tax Incentive for developing a business.

The Research and Development (R&D) Tax Incentive offers companies up to 43.5 cents back for every eligible dollar – even in cases where small companies aren’t yet paying tax. It is a focused, significant entitlement program that may aid business owners offset some of the costs of doing R&D. The incentive’s purpose is to assist more businesses to do R&D and innovate. However, many companies aren’t certain on what exactly qualifies as “R&D”.

Essentially, if you are spending expenditure to advance existing or produce new products, services, or processes, then there is a high probability you are doing R&D. This can originate in numerous forms, such as: streamlining manufacturing process, constructing an app to deliver an enhanced customer experience to clients, or evolving a new food item with a different or rare combination of ingredients.

For a company to be able to claim the R&D Tax Incentive, the business must meet four standards. These are:

• The business is incorporated as a company
• The entity is for profit
• The company is registered in Australia
• Over $20,000 was spent by the business

If you’re still unsure about what is activities are eligible for the incentive, please refer to the list below:

Qualified expenses:

• Depreciation of R&D associated assets
• Rent, utilities and other subsidiary costs
• Equipment and software licenses
• Patents and related legals
• Travel expenses
• Salaries
• Operational expenditures

Unqualified expenses:

• Marketing or advertising costs
• Contractors outside of Australia
• Salaries for staff not doing R&D related work
• General legal fees
• General accounting fees
• Expenses from this financial year

For those interested in self-claiming the R&D tax incentive, TaxTrax is new software that helps companies lodge and submit an R&D application by themselves.

For more information about the R&D Tax Incentive or the grant submission process, contact your usual AusGrant representative.

The adequately deemed ‘silly season’ has officially come to a close, marking the start of a new year, new resolutions, new ideas, and new ways. Although these are often concerned with a new fitness regime, new language or the phasing out a bad habit in our personal lives – our corporate goals shouldn’t be left off the resolutions agenda either.

Whether you believe in resolutions or not, making a list of action can help you achieve your goals in 2016. Certainly, the New Year means new opportunities—for networking, meeting clients, expansion, and growth. It is a great time of year to evaluate the old, and consider the new. For instance, the inclusion of ‘innovation’ in a company’s goals for 2016 is a great place to start.   Due to Turnbull’s Innovation Statement being released last month, there is no denying the fact that the term ‘innovation’ has become politically fashionable. However, how can companies translate this buzzword into a reality for their company?

One perceptible way of growing innovation in your company is by increasing research and development (R&D) activities. Besides supporting the creation of new products, processes, and software, R&D can increase profits and knowledge for a company. Consequently increasing cash flow and improving productivity. Moreover, companies can benefit further by utilising the governments R&D Tax Incentive.

The research and development (R&D) incentive is intended to boost innovation in firms and improve business processes – and can also provide companies with generous tax benefits. Although, there is a common misunderstanding that the R&D tax incentive only relates to technology or research focused companies, such as the enormous pharmaceuticals companies. Nonetheless, any business which is innovative or undertaking eligible activities may qualify. The 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 small or young firms aren’t yet paying tax.

Hence, in 2016, companies wishing to refresh, reinvent and re-energise their companies should highly consider investing in innovation. As mentioned above, R&D activities are one great way of driving innovation. Posing the question, what new opportunities could R&D create for you this year?

AusGrant is one of Australia’s leading grant consultancy services, providing specialist services relating to grant submissions and R&D tax agent services.

With a nickname of ‘The Start-Up Nation’ and a thriving tech-scene, there is no denying that Australia could learn a thing or two from the country of Israel. Wyatt Roy, Assistant Minister for Innovation, noted last month how Israel transformed itself into a digital economy with more start-ups per capita than any other country. Indeed, the government hopes to do the same with Australia with the aim to position ourselves as a strong competitor in the global economy.

In light of this, the Innovation Statement that was released last week touted Israel as an innovation mecca, with Tel Aviv being positioned at the equivalent to Silicon Valley. As announced in the $1.1 billion Innovation Statement, or “ideas boom”, Australia is planning to take on a more innovative and international focus. Innovation Minister Christopher Pyne said there is $36 million assigned towards forming five landing pads around the world to help Australian tech companies get a base in foreign markets.

The pads will be a physical hub for Australians who are considering undertaking entrepreneurial activity in the overseas location. Moreover, the landing pads will allow access to venture capital funds, facilities and contacts. They are proposed to act as a home away from home for Australians who want to do business overseas. This week it was announced that the first pad to be set up will be in Israel’s Tel Aviv.

Israel, similar to Australia, comes from an economy primarily based on agriculture and traditional manufacturing. However, it is their rise to a technologically advanced nation that has acquired the Australian government’s attention. In fact, the relatively small country has the third highest number of companies listed on the Nasdaq stock exchange in New York. In relation to the landing pad, Pyne noted that there is a huge potential for Australian companies to take advantage of Israel’s knowledge-base and technology advanced economy.

Are you interested in undertaking entrepreneurial or innovative activities? If so, participating in research and development is one way to expedite innovation in your firm and can allow business leaders to discover creative products, processes or solutions. The government provides a generous Research and Development (R&D) Tax Incentive which is highly effective in aiding rising companies in promising future industries. In particular, the R&D Tax Incentive offers companies a heavy cash refund of up to 43.5 cents in the dollar for eligible activities. Contact AusGrant today to find out if you’re eligible for generous tax benefits.

Quality Australian livestock – it is one of our national icons that is quintessentially Australian, along with vegemite, football, and pineapple on burgers. In fact, last year alone, Australian livestock products were shipped to 150 different countries.

Indeed, Australia is competitive in producing quality meat, which according to Dr Barnard, the General Manager of Trade and Economic Services for Meat and Livestock Australia, is due to having the best practices.

However, it could come as a shock to several that activities characteristically related with agriculture and farming can qualify for the research and development (R&D) tax incentive. With developments in the food sciences and the concern of feeding an increasing population, those in the agriculture industry have the opportunity to claim and profit from the widespread tax incentive.

In fact, the R&D Tax Incentive is the biggest scheme in Australia that aids businesses participating in research and development. Over $1.8 billion is granted annually and it is not competitive – in other words, if you are eligible then you are permitted to it. The classification is deliberately comprehensive as the Government wishes to support R&D across various business and industry sectors. Thus, highlighting the fact that it’s not just about ‘white lab coat’ research, but rather, encompasses all types of research and industries.

Moreover, farming and agriculture have a surfeit of prospects for experimentation, such as disease control, irrigation, new product development, more proficient or economical harvesting techniques and soil development.

Overall, numerous businesses are missing out on the government incentive for R&D benefits purely because they did not know whether or not they were eligible for the incentive. In light of this, providing guidance to you on what undertakings are eligible, and facilitating you to comprehend the business benefits and key features of the offset, is what AusGrant do best. Contact us today to find out more or if you could be eligible for generous tax benefits.