The who, what and when of R&D tax incentives for Australian startups

If you are just starting out in business you may not be familiar with Research & Development Tax Incentives (R&D) available from the Australian government.

They offer help to businesses by offsetting some of the costs of performing R&D. Many startups are not aware of what constitutes as research and development, therefore potentially missing out on a substantial cash injection for their business.

Is my startup eligible to submit an R&D grant application?

R&D projects usually comprise of a set of activities with start and finish dates, undertaken to generate a specific piece of new knowledge. Under the R&D Tax Incentive Scheme, eligibility is determined on an activity basis rather than on a project basis. Eligible activities fall into two classes, core R&D activities and supporting R&D activities, both of which can be claimed.

The R&D program has four steps:

1. Conduct eligible R&D activities

You will need to write an R&D project plan to support your application. If you haven’t done this before there are various service providers that can help you put this together and ensure that you provide the correct information. Getting the base project plan together is tough for the first year’s claim but once you have this it will form a template for your business to use for subsequent applications.

2. Register with AusIndustry

Companies with an income year of 1 July 2012 to 30 June 2013 who wish to apply for the R&D Tax Incentive for the 2012-13 income would need to have lodged their registration application with AusIndustry by Wednesday 30 April 2014.

3. Ensure your books are in order

Use a bookkeeper who has experience in accounting for R&D tax incentives. Your bookkeeper should understand how to structure your company expenses efficiently to help maximise your eligible expenses.

Make payments for all eligible expenses in the year of the claim – i.e. before June 30.

Don’t get caught out with employee super expenses. Although this isn’t due for payment until July 28, you will need to make the payment before June 30 in order to include these expenses in your claim amount.

Get your filing in order. Expense receipts, travel diaries and any other relevant documentation that may be required in the event of an audit to substantiate your claim will need to be kept safely.

4. Lodge your company tax return with the ATO

Talk to an accountant as soon as you make the decision to apply for R&D tax incentives.

Seek advice from your accountant to ensure your business is prepared to lodge its return and understand how the timing of the application submission will impact forecasting your cash flow.

You can read more by downloading the information pack from the AusIndustry website.

Additionally, you may use the online eligibility tool to assess if your startup qualifies.

NOTE: As part of the 2014-15 federal budget, the government reduced the rate of benefit to all companies under the R&D Tax Incentive, effective from 1 July 2014. The rates of the refundable and non-refundable offsets will be reduced by 1.5 percentage points to 43.5% and 38.5% respectively. 

The change will apply for a company’s income years commencing on or after 1 July 2014.

Clare Hallam is the COO of Pollenizer. She has worked alongside the founders from the very early days of Pollenizer and is now responsible for ensuring that the machine is well oiled and finely tuned to allow the business operations to scale and expand across the globe.