Is the R&D Tax Offset Refundable in Cash?

February 25th, 2016

Despite the fact that the Research & Development (R&D) tax incentive claim process can seem quite convoluted, the benefits of doing it properly are well worth the effort. But just how exactly is the benefit calculated and what do business owners gain in pocket?

The answer to this depends greatly on the size and nature of the company. To elaborate, the R&D Tax Incentive is provided in Australia through a tax based incentive program whereby the Australian Government provides companies with a tax benefit. However, the type of offset differs depending on the turnover of the company and the amount of R&D expenditure incurred.

In general, the following rules apply:

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Thus, as the above example reveals, if a company is in a loss then they will typically receive a cash back benefit. In contrast, if a company is in profit then this will result in a reduced tax payable.

In general, the 43.5% refundable offset is an often overlooked, yet worthwhile, option available for smaller companies and start-ups. Ultimately, a cash back benefit can provide a financial injection to help start-ups that are often cash-strapped.  For example, a start-up company that is in a loss position for tax purposes who spends $1 million on R&D will receive a $435,000 cash refund under this incentive.

Nonetheless, the reality remains that in many cases the claim is not easy. This is usually because identifying eligible expenditure involves a detailed and complex analysis of a company’s activities along with the application of the R&D tax rules.¬†There can also be challenges in collating the essential documentation to provision a claim. Swanson Reed is a specialist R&D Tax consultancy firm that can assist your business in having the best chance of qualifying for the incentive. We’ve helped clients across many industry sectors access the R&D Tax Incentive, and as a result, the extra cash flow has enabled clients to further develop and perfect their core products and services.

Please contact Swanson Reed if you are interested to learn more about the R&D incentive and what this can mean for your business.