‘Innovation’, the term alone has somewhat formed a place in the Australian vernacular in recent months. The buzzword skyrocketed into popularity when Prime Minister Malcolm Turnbull issued its National Innovation and Science Agenda in December, detailing plans to increase innovation, entrepreneurship and reward risk tasking. Thus, with Australia embarking on an ‘ideas boom’ in 2016, 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 R&D Tax Incentive is the Government’s most significant policy instrument to encourage business innovation – and its deadline for registration is looming.
As the cut-off for lodgement of R&D Tax claims approaches, companies should now be turning their focus to the preparation and registration of their R&D tax incentive claim for 2015. The deadline for lodging an application for registration is ten months after the end of a company’s income year. Hence, for majority of companies with a standard income period of 1 July 2014 to 30 June 2015, lodgement of their registration with AusIndustry is due by 30 April 2016. However, since April 30 falls on a Saturday, this year companies are able to lodge on Monday 2 May 2016.
Ultimately, the R&D Tax Incentive is a broad-based program designed to encourage Australian businesses to invest in R&D activities that would not otherwise occur and is likely to benefit the wider Australian economy. Nevertheless, the R&D tax incentive is a frequently missed opportunity for small and medium sized companies (SME) and start-ups, with many mistakenly believing they are not eligible.
Despite the fact that the R&D claim process can seem quite convoluted, the benefits of doing it properly are well worth the effort. In particular cases, it offers a 45 percent refundable tax offset for R&D expenses in the form of annual cash rebates to companies that have less than $20 million in revenue and file tax returns in Australia. Essentially, a cash back benefit can provide a financial injection to help companies that are often cash-strapped. Thus, for a small company involved in research, the tax benefit is a welcomed non-dilutive source of funding for R&D activities.
As the deadline is a little over a month away, it is recommended that businesses check eligibility and seek the advice of an R&D Tax Specialist in order to take advantage of the possible tax benefits.
Could you be injecting cash into your business this tax season?