Government Grants vs the R&D Tax Incentive – What’s the Difference?

February 23rd, 2016 government grants vs the R&D tax incentive

With three layers of government and approximately 700 business grants available, finding the specific grant that is suitable for you can be difficult. Thus, for small businesses approaching this buffet of choices, the task can be daunting.  Moreover, tax incentives are generally lumped in the category of ‘grants and incentives’, making it hard to differentiate the differences between a grant and an incentive.

Firstly, there are a number of different grants available related to innovation, each with their own philosophy and measures. A prominent option is offered by the Department of Industry and Science called the Entrepreneurs’ Infrastructure Program that may  be of importance to innovative Australian entities – in particular, the Accelerating Commercialisation (AC) grants option. The goal of an AC grants is to help with the commercialisation of entrepreneurs technology-based products.

To summarise, the AC grant provides between $50,000 and $1 million on a dollar-for-dollar matching basis. Nonetheless, this grant, as with majority of other grants, is highly competitive. Applicants who wish to apply for grant funding will need to go through a competitive merit application process.It is awarded on a discretionary basis by a committee appointed by the Innovation Australia board.

In contrast, The R&D Tax Incentive works differently in that it is not competitive. Rather, if your company is eligible, then it qualifies. In short, it is a broad-based, market-driven program that aims to boost company competitiveness, improve productivity and deliver economy-wide benefits to Australia. The R&D Tax Incentive offers a 38.5c to 43.5c tax offset for eligible activities and provides businesses with more predictable support. In addition, it improves the incentive for smaller firms to engage in R&D. Ultimately, the R&D Tax Incentive is the Australian Government’s principal measure to encourage industry investment in research and development.

If the R&D Tax Incentive is an area your company wants to explore, Contact Swanson Reed for more information on how we can advance your company’s market value and boost its bottom line through the R&D Tax Incentive.