Using R&D Tax Incentive to Make the Most of Downtime During COVID-19 Disruptions

• A company’s ability to legally trade or demand for their output;
• Logistics of transporting a company’s supply inputs, output or people;
• Access to cash and working capital from customers and investors;
• Working arrangements and the togetherness of company staff

These challenges present the need for companies to rapidly adapt their business models in order to survive.

Swanson Reed has been encouraged to hear that a number of clients whose businesses have been placed in turmoil have stated that they plan to use the R&D Tax Incentive during downtime in order to:

• Embark upon completely new product lines rendering the need for generation of new knowledge and resolution of unknown outcomes by experimentation within the scope of the R&D Tax Incentive;
• Accelerate existing or previously dormant R&D Projects to bring them to fruition more swiftly;
• Commence early compilation of FY20 R&D claims (and gathering of documentation) such that lodgement can be made swiftly after 30 June to expedite receipt of R&D Tax Offset entitlements. These offsets for FY20 may potentially be augmented by increased tax losses during FY20;

Swanson Reed also notes comments by Nev Power to the AFR this week in respect of his appointment to the National COVID-19 Coordination Commission aiming to devise a long-term strategy to deliver a competitive, best-in-class manufacturing sector. Nev noted that:

• Use this time to take stock of the business’ strategic direction;
• Where applicable, make use of the R&D Tax Incentive in conjunction with various government stimulus measures available to them, including
  • The federal government’s job seeker programme;
  • Various concessional loan schemes offered by state governments;

This crisis will inevitably mean that many Australian businesses may fail, however it presents an opportunity for those that remain, and who use any downtime wisely to accelerate out of any recovery period with a stronger market position than they previously had.