As published in Inside Small Business
The End of Financial Year (EOFY) is a time to get our ducks in a row and dot those Is and cross those Ts. In most, cases this would have to do with getting your taxes in order. Let’s try to apply this discipline to a more “fun” aspect of EOFY figures – getting some cash back from the government. The most popular government grants or incentives are the R&D Tax Incentive and EMDG (Export Market Development Grant).
Each of these offer eligible Australian businesses generous cash back opportunities.
To optimise your ability to get this cash back, a business needs to be aware of some make or break tips before EOFY.
We have compiled a list of some things to look through before the EoFY in order to put your company in the best position.
R&D Tax Incentive tips
1. Payments to associates
Since payments to Associates can only be claimed if they are actually paid, make sure that all these are paid by 30 June 2017. This would include for example salaries to founders or shareholders.
2. Record keeping
Good record keeping is essential for substantiating your claim. Go through your records and make sure everything is up to date and well organised. Not only your financial records should be in order but also the technical records to evidence the R&D work that you have undertaken.
3. Connected/affiliated entities
Make sure contracts and payments are completed with your connected or affiliated entities.
Super cannot be claimed as a tax deduction unless it was paid by 30 June 2017.
5. Overseas R&D
You cannot claim R&D activities undertaken overseas unless you have an Overseas Finding. An overseas finding needs to be submitted to AusIndustry before 30 June 2017 for any work you wish to claim for the FY17 year.
6. Pooled assets
Depreciation on pooled assets cannot be notionally deducted for R&D purposes. Consider depreciating R&D assets in their own category.
7. Aggregate turnover
If an entity has an aggregate turnover of more than $20m, then it does not qualify for the 43.5 per cent refundable tax offset, instead it qualifies for a 38.5 per cent non-refundable offset. The Aggregate Turnover is calculated as the annual turnover of the R&D entity for the income year plus the annual turnover of any entity that is connected or affiliated with the R&D entity, for that part of the income year that the entity is connected with you.
1. Cash accounting
EMDG works strictly on a cash basis, meaning that you can only claim amounts that were actually paid by 30 June 2017. So, make sure that anything you want to claim is paid before the end of the month.
Make sure any expenses paid for by employees of the company on behalf of the company have been reimbursed.
Make sure your contracts with overseas reps and marketing consultants are clear and signed. Their duties need to be clearly articulated in the contracts and they should have records of the work they did for you.
4. Internal company transactions
If you have multiple companies, it is essential that contracts and flow of money between entities is clear and intercompany transactions are done before June 30, 2017.
Remember – all revenue and expenditure needs to be taken up by the Australian entity making the claim.
There was a buzz in the air as we drove past some of the biggest companies in the world on 6 lane wide highways. We had arrived in San Francisco and were all ready to be engrossed in the vibrant startup culture that it had to offer.
We soon realized that we were starving, and decided that we all needed a boost to deal with the time difference and get through the day. After stuffing down an average tasting coffee and a bagel with “lox”, we drove to the famous Stanford University. We were quickly impressed by the world-class facilities present, and enjoyed the bike-riding student culture. It was fitting that the beginning of our trip, in which we aimed to learn from the startup-culture of Silicon Valley, had its first stop at the university where so many notable alumni and entrepreneurs had emerged, including Larry Page (Founder of Google) and Elon Musk (world-famous inventor).
In the afternoon, we had our anticipated meeting with our client RangeMe, an Australian startup that transitioned to San Francisco while maintaining their Research and Development processes domestically. Hearing personally from the founders of RangeMe, who were already a client before a successful transitioning overseas, was important in gaining insight into the differences between the still maturing startup culture of Australia against the mature and sophisticated startup industry in San Francisco. The ease at which startups can raise and generate capital from major Venture Capitalists was intriguing, with many capital raising rounds enticing investors to pour their money into companies across a variety of sectors. It was clear that the overall quality of talent helps to build the competitiveness of every startup within the Silicon Valley region, and sets an example for the Australian market to try and replicate.
We finished off our day with a walk through “downtown San Francisco” (please read in an American accent), a tasty dinner in China town, a walk by AT&T Stadium (home of the SF Giants, of which we are all now big fans), and a relaxing time in the Jacuzzi at our 5-star house.
Day 2 started with an interesting experience at a Silicon Valley Startup Fair. Immersing in the startup culture was key to gaining the most from our time away, and we quickly established strong connections and networked with some of the top talented entrepreneurs in the area. A unique beer-manufacturing machine caught my eye, as well as other education-based software development projects.
In the afternoon, we attended a Pitch Day at Founders Space, the number one accelerator for overseas startups as rated by Forbes. Each startup had their CEO pitch their business for approximately 5 minutes, explaining the need of the product, their uniqueness and the amount and aim for the funds being raised. Attending as investors of a fund gave us a high level of credibility amongst the startups, with many quickly approaching us to pitch their ideas. Impressive startups included Equobot, a news filtering app that gives advice to stock investors based off information in the market, as well as Spryfit, a money-making incentive app for exercise-enthusiasts. What was very interested was the way in which the CEOs presented themselves while pitching. Not one suit was seen. Coming from Australia, where outward presentation is key for any person to be taken seriously, seeing people pitch in jeans and a t-shirt was interesting.
On day 3, we had the highly anticipated meeting with one of the most successful early stage venture funds and seed accelerators in the world, 500 Startups. We discussed the buying and investing side of the startup market, gaining clarity over successful and effective investment processes, the way in which the company guides their startups to raise capital, and how to become a global, billion-dollar company. Easier said than done. However, it was evident how much we gained for the experience of learning from a knowledgeable partner at a successful venture capital firm.
Our next stop was Google, something we were all looking forward to. We all expected a massive skyscraper that could be seen from miles (because American’s don’t use kilometres) away. However, what we saw was a massive suburb with Google buildings spread all around. It was easy to see how they had become so successful. In a culture of bike-riding, innovation and casual dressing, it was clear to see that everyone in Google is encouraged to attempt the impossible, to try and grow and take things to the next step. Such an environment can only be positive.
After an afternoon of shopping (which was an afternoon too long for me), we attended an interesting talk from “Growth Hacker” Sean Ellis who spoke about driving sustainable growth within startups. Key takeaways include the importance of focusing on high leverage goals to improve sustainable growth, aiming to understand the value added for customers to ensure retained growth, as well as the necessity to have a high level of velocity of testing and experimentation to drive innovation and development of processes and products.
As Friday was our day off, we decided to do some exploring around town. We enjoyed a great tour around AT&T stadium, and basked in the beautiful weather and views of the Golden Gate Bridge and San Francisco Bay area.
We wrapped up our trip in the US by spending an afternoon in LA, driving through Beverley Hills, seeing the famous Hollywood sign (from a vast distance), as well as seeing the “Walk of Fame” and enjoying a delicious meal together at a Japanese restaurant.
Although boarding the plane was upsetting as our trip was coming to a close, we were all alive with new ideas and opportunities for when we get back. The future is bright.
This article originally appeared in the Financial Review.
Chief executive of the Australian arm of global technology services giant Dimension Data Steve Nola will turn his eye towards investment opportunities in the local tech startup scene, joining investment arm of Rimon Advisory as a non-executive board member.
Mr Nola will continue in his role at Dimension Data, but will help Rimon identify new investments, which generally start at the seed round, before progressing to the second stage follow-on rounds.
Rimon Advisory has operated for about five years, helping entrepreneurs plan long-term growth and advising on how to maximise available grants and tax incentives. It opened up a venture capital arm two years ago, enabling it to back some of the companies it was working with and then participate in subsequent rounds.
So far it has publicly disclosed investments in three start-ups; logistics technology provider Premonition, transport and airport connection platform Jayride and online concierge service Amazing Co. However it has also agreed investments in two further start-ups; foreign exchange platform Psyquation and social media intelligence firm PoweredLocal.
Mr Nola said the new role would benefit his existing employers at Dimension Data, giving greater insight into the disruptive small players that could be future partners or competitors to reckon with down the track.
He said he had long harboured a passion for the disruptive innovation happening in the startup scene and felt Rimon had hooked into a good model in mixing an existing advisory firm with investment.
"In my 30 years at Dimension Data I have seen a lot of customers with fantastic ideas that have never been given the opportunity to really flourish and take things to the next step," Mr Nola said.
"I want to impart some of the skills and knowledge I have picked up on to smaller start-up organisations ... If you are going to invest in something early stage you want to be able to give it more than just dollars in terms of capability to go with it."
Rimon Advisory co-founder and managing director Lior Stein said the company's advisory business provided it with an excellent vetting opportunity for potential investments, and that the company was not looking for companies operating in any particular sector. He said the firm looked for the basics of a strong leadership team, a scalable product and a large (preferably global) addressable market.
"We are looking to invest in technology that we think is interesting and that we can have a relationship with the team and have fun in the journey," he said.
"Every team we have invested in, we really enjoy spending time with them."
Mr Stein and Mr Nola both said they believe there are great opportunities for Australian entrepreneurs to think big, while remaining at home, however Mr Stein expressed concern that the prevailing political discourse around innovation had taken a turn for the worse.
He said that while the recent abolition of 457 skilled migration visas and rumoured negative changes to R&D tax incentives were understandable from a political perspective, they sent the wrong message internationally about Australia's standing in the global technology ecosystem.
"I think the government gives mixed messages ... When the Innovation Statement came out it was very positive, but then the R&D tax incentive was reduced, and there has been regular talk about changes that may or may not come, which creates nerves and stress," Mr Stein said.
"The 457 visa changes were not helpful, when you are building a global tech economy and you want to compare yourself to the likes of Silicon Valley and Israel ... they are open to the world.
"There needs to be a better balance
between wanting to take care of your own, which is important, and also
showing a message to the rest of the world that we are actually a big
By Paul Smith
When the government budget is released, there is always one constant: anxiety and confusion. Amid the deciphering of the ‘millions and billions’ of new complexly named government initiatives, most households and businesses end up asking the same two questions:
What does any of this mean, and how does this affect me?
As an innovator, start-up or entrepreneur, here is what you need to know about the $29.4 billion budget deficit for 2017-18:
The R&D Tax Incentive, which focuses on encouraging startups and established businesses to invest in new innovations, has largely remained the same with the following characteristics:
INCREASED ADVANCED MANUFACTURING FUND
Importantly, new funding has also been dedicated to growing the booming technology startup space, with $100 million being allocated to create an Advanced Manufacturing Fund . The new fund aims to stimulate the manufacturing sector to embrace new technologies, boost innovation and employment in a transitioning economy, as well as investing in emerging engineers and scientists.
EXPORT MARKET DEVELOPMENT GRANT (EMDG)
The Export Market Development Grant provides substantial support to small and medium sized businesses, reimbursing up to 50% of eligible export promotion expenses relating to overseas representatives, marketing consultants, marketing visits, free samples, Intellectual Property registration, trade fairs and seminars and promotional literature and advertising. Austrade will continue to administer the Grant, with eligibility requirements remaining the same for 2017-18, including:
The commitment of the government to EMDG is evident, with $137.9 million being dedicated to the success of the initiative.
OPENING CROWD-SOURCED EQUITY FUNDING TO PROPRIETARY COMPANIES
The new budget will introduce new financial services regulations, particularly affecting the banking sector, with the aim of motivating the Fin-tech industry to produce new and innovative products and services. These regulations will enable businesses to test their innovations in the market within a license, provide holistic financial advice, issue large amounts of consumer credit, and reduce the number of Australians taking their skills offshore.
Moreover, in line with the introduction of these new financial services regulations, the government have also reduced red-tape involved in capital raising for startups. The new budget has included legislation to open Crowd-Sourced Equity Funding (CSEF) to proprietary companies , providing new funding avenues for startups that face difficulty raising capital from traditional sources.
Ultimately, 2017-18 is set to be an exciting year for startups looking to undertake new ventures and seek to achieve the new innovations that could take their business to the next level. Given the cash deficiencies that are often experienced by startups, this could be the best year to take advantage of the R&D Tax Incentive, Export Market Development Grant and the new regulatory environment for the financial services industry to increase the cash within your business and seek to grow from Start-Up to Success .
An anomaly about government funding is that despite being such an attractive source of cash, the majority of eligible companies either don’t know it exists or don’t know how to access it.
If I were to simplify government grants I would explain them in two points:
The first being Innovation and the second being assistance for bringing foreign revenue to Australia.
The benefit involved in attaining government funding can be quite large and at times could amount to between 40 per cent and 50 per cent of funds spent in innovation or marketing to foreign markets.
Ask yourself the following question: are you doing something different that you believe your competitors aren’t doing, and that is new in the space?
If your answer’s yes, the next step would be to consider the three basic principles of innovation grants
1. New Knowledge 2. Experimentation and 3. Uncertainty
These three principles all flow into each other.
Lets explain these principles using actual case studies.
1. New knowledge begins by identifying a gap in the market.
A toy company (Copter’s Pty Ltd) that manufactures radio controlled helicopters decided to develop a new model that included a multi-lingual voice recognition system. The company wanted to integrate headset and microphone control into their helicopters. Some web searches were done and the result was that there seems to not be an off the shelf product available in the world that solves this problem.
An organic beverage manufacturer and formulator (Organics Pty Ltd) realised that the short shelf life of organic beverages is a limiting factor for exportation. Some web searches were done and the result was that there seems to not be an off the shelf product available in the world that solves this problem.
Copter’s Pty Ltd soon realised that the new additions proposed many challenges. The engineers had to trial different technologies in order to get the best result.
At this point Organics Pty Ltd started developing a solution to fill the gap that was found. The development process required experimentation and different iterations of the product. The process is an ongoing process as Organics Pty Ltd is continuing to improve their findings in this area.
Both Copter’s Pty Ltd and Organics Pty Ltd didn’t have certainty at the outset that these new projects were going to work. They did believe that each would be a success but the final products were achieved through much trial and error.
These final products are the items that filled the initial gap and are now the new knowledge that each company has brought to the world.
The main innovation grant available in Australia is the R&D Tax Incentive and can definitely be applied to the manufacturing industry should the project be eligible. You can find more information and apply for it here .
FOREIGN REVENUE BEING BROUGHT TO AUSTRALIA GRANTS
This avenue is simpler to explain than that of innovation grants.
There is funding available for exporters who are spending money on marketing their products to foreign markets.
Again, three basic principles, the first being an Australian product, the second being that revenue flows to Australia and the third being that marketing expenses are recognised in Australia.
The product needs to be either completely made in Australia or the majority of the product made in Australia.
If the products have an element made in a foreign country e.g.China it could still be considered an Australian product.
2.Revenue flows to Australia
The revenue gained from the Australian products being marketed abroad needs to be recognised in the Australian entity.
An entity need not have actual revenue in the first two years of applying for this grant.
3.Marketing expenditure being recognised in Australia
Expenditure spent on marketing to foreign markets needs to be recognised in the Australian entity.
These expenses could include staff and consultants employed in the foreign country, flights, conferences attended, Google and Facebook advertising, websites targeted overseas, trademarks and patents, pamphlets and flyers made and free samples being given to enter a market.
The incentive described above is known as the Export Market Development Grant (EMDG), and it can be applied for here .
EMDG offers up to a 50 per cent grant on the expenses described above.
Statistics show that about 70 per cent of eligible Australian companies either are unaware that they are eligible, or simply don’t know how to go about accessing the funding available.
Best practice would be to consider the principles explained above, and enquire as to a possible benefit and eligibility.
As published by 'Inside Small Business'.
The days of no private funding being available in the Australian tech industry have gone. The good news is both new and old funds are on the lookout for our best and brightest start-ups so brush up on your communication skills and learn the art and psychology of pitching.
The structure and makeup of a good start-up pitch deck is readily available and any entrepreneur worth their salt knows time and energy needs to be spent getting it polished and to the highest standard.
Interestingly enough though, I’m not sure how much brainpower is actually driven towards the subtle psychological nuances of a great pitch.
Let’s step out of the realm of investor pitches for a moment and try to analyse why a simple beer or coffee with a friend is enjoyable.
Could it be the topic of conversation? Many people would reply in the affirmative. But I disagree. That very same topic of conversation with a person you don’t gel with suddenly becomes numbingly boring.
So what is that magic ingredient? Simple. The person on the other end of the conversation is engaging and somehow understands what is required to keep you entertained.
Just bear with me for a moment.
Let me take your mind back to a classic Oscar award winning film – The Gladiator. Maximus is forced to win his first gladiator fight. Maximus shouts out at the crowd in disgust: “Are you not entertained, are you not entertained!”
Proximo decides to unlock Maximus’ desire for revenge and explains to Maximus how he had once got an audience with the emperor. Proximo explains, and I quote, “… Learn from me. I wasn’t the best because I killed quickly. I was the best because the crowd loved me. Win the crowd, win your freedom. ”
In those words from Proximo can be found a hidden secret that, if uncovered properly, can transform a pitch.
I have seen it all too often. A presenter will get caught up with what is on the slides or with the detail of the technology, and forget they need to weave together a story about their journey and the vision they have.
When we watch movies, why is it that we cry, laugh, feel sympathy, empathy, anger and elation? It’s because the director and his team are experts in storytelling.
Allow me to reword Proximo’s advice to Maximus into start-up terms. It would go something like this: “Capture the investor, capture your opportunity at success.”
This is, of course, much more difficult to do than following a skeleton of a pitch deck.
But here are a few suggestions on how to capture your audience when pitching:
2. Less is more when opening a pitch
3. Make a tweet – a short statement that describes succinctly what you do
4. Tell a personal story
5. Have few words in your deck
6. Have two decks
7. Do something to create dialogue
8. Sell the vision
9 . Use a graphic designer
10. Don’t be desperate
Remember this the next time you need to pitch; one little story could change everything.
Lior Stein, Director, Rimon Advisory
Originally published in StartUp Smart.
The R&D tax incentive has been a bastion of innovation in Australia for decades, and Malcolm Turnbull’s announcement that Australia was to support the ideas and tech boom was met with great applause and accolade.
But, as the old saying goes, the proof is in the pudding.
Other than some assistance for investors (of which investors who are also founders of the entity are excluded), what has actually been done to support our rising tech stars?
As both a director of a fund and an advisor to many seriously talented startups, I am, to put it politely, appalled by the federal government’s suggestion to reduce the R&D tax incentive.
I have seen the magnanimously positive effects of the cash rebate benefit of this tax Incentive on hundreds upon hundreds of occasions. The absolute elation when that cash comes through the door is plain to see, and allows that little breather needed to build a startup.
That’s important, as one of the biggest pitfalls of startups is the difficulty to get to that next stage.
I often use the analogy of a rock climber. The rock climber looks for that next small little protrusion of rock that will serve as his handle to lift himself up to the next point. A small crevasse for his hands or feet to balance while he holds on in order to keep going. This will continue until, finally, an opening is reached, a breather can be had, and then onwards and upwards to the peak.
There would be no peak if it weren’t for the little crevasses along the way.
At least the rock climber usually has safety gear. Should he or she slip they can start again.
But once a startup starts that climb and runs out of funding, it’s an all-out scramble, and the fall can be quick and painful. Down rounds, debt, desperation and more. And please don’t think I am being over dramatic here, I am not.
Talented professionals leave their jobs and mortgage their homes with the dream of building their technology startups. Rather than a cut in funding, the government should be pursuing policies that encourage R&D as these tax incentives to early-stage businesses are critical.
Now I’m sure very smart politicians will say this wasn’t their choice and the government doesn’t need to fund these types of decisions.
This would be a fair argument, until you take into account how I opened this piece.
Turnbull’s innovation statement came out with trumpets blowing as to how this was the era of the technology startup, and how our technology talent was going to replace the glorious coal era.
And of course, how this innovative and forward thinking government was going to be one of the anchor support structures of Australia’s tech birth.
So, Mr Turnbull and your administration, think about the rock climber.
Our entrepreneurs each need to continue getting their “crevasses” on their path to growth and the peak. This is critical if we are to fulfill our vision of becoming an innovation nation.
This article originally appeared in StartupSmart.
A number of months ago the government introduced tax incentives for early stage investors whereby from 1 July 2016, if you invest in a qualifying early-stage innovation company (ESIC), you may be eligible for tax incentives.
A few of the startups we work with have contacted us and asked: “I have an investor who wants to put in money but they want to make sure they are going to get the tax incentive, what do we need to do?”
There are three things that need to be considered:
To qualify for the tax incentives, investors must have purchased new shares in a company that meets the requirements of an ESIC immediately after the shares are issued. The shares must be issued on or after 1 July 2016.
The benefits for investors are:
The investor must determine whether they are eligible for the early-stage investor tax incentives (for example whether they are an affiliate of the ESIC), in addition the onus is on the investor to confirm that the company qualifies as an ESIC at the relevant test time. The investor should keep records to support their entitlement to the early stage investor tax incentives.
A company will qualify as an ESIC if it meets both:
Practically, the simplest way to determine its eligibility is if a company undertakes activities that meet the 100-point innovation test, as opposed to the principles-based innovation test.
A company can instead choose to request a ruling from the ATO on whether it qualifies as an ESIC.
Reporting for investors
In order to get the benefit you claim the early stage investor tax offset in your income tax return. If you do not use all of your tax offset in that year, you can carry it forward for use in future income years.
Reporting for ESICs
Companies are required to report information to the ATO if they issue new shares to one or more investors during a financial year that could lead to an investor being entitled to access the early stage investor tax incentives.
The company must report the information to the ATO by 31 July each year for new shares issued in the previous year.
The form to report information is being developed.
In the meantime, for each investment that a company receives during the year that may give rise to an investor accessing the tax incentives, it should keep the following information in order to report:
The company also needs to make sure that it meets the requirements for being an ESIC. When reporting, you will be asked to specify whether the 100-point innovation test or principles-based innovation test has been applied, and whether you have received a ruling on your eligibility.
Companies will report this information electronically when the form becomes available.
When getting an investment, both the investee and the investor should keep records to show that the company meets the requirements of being an ESIC and the investor is eligible for the tax incentive.
They should also keep records of the investor’s particulars, as well as the details of the share issue. ESIC’s should ensure they report by 31 July and investors should remember to include the details in their tax return.
This article originally appeared in StartupSmart.
by Dinushi Dias
While the 2016 budget proved to be somewhat of an anticlimax for startups , there are some aspects that present opportunities for founders and entrepreneurs.
Speaking at StartupSmart’s Budget Briefing Breakfast on Thursday morning at General Assembly in Melbourne, Rimon Group director Lior Stein said the regulatory sandbox for fintechs will benefit all startups, and new cash incentives to run internship programs will prove useful too.
Exploring the sandbox
The federal budget outlined how ASIC will soon be beginning consultations to establish a regulatory sandbox to allow fintechs to test ideas and new products with a limited number of clients for six months without having to jump the usual regulatory hurdles.
This is something for all founders and entrepreneurs to be aware of, even if they’re not operating in the financial services space, Stein said, because it will provide information on new and cutting-edge technologies that might make running a business smoother.
“That’s what technology will do – make it easier,” Stein said.
“It will make your business easier to run and it will make it easier for everyone.”
Stein says startup founders should use this sandbox to become early adopters of new fintech apps and services, making them leaders in the space and providing a competitive advantage.
“It can give you an edge,” he said.
The internship program
The government’s Youth Employment Package is aimed at getting more than 120,000 unemployed people aged under 25 into work , with businesses receiving $1000 upfront to host interns for between four to 12 weeks.
Stein said this creates a great opportunity for startups, but it’s important to ensure the young workers aren’t being exploited.
“One of the major issues with startups is they get exceptionally busy,” he said.
He says interns can gain business skills and prepare for the workforce will also helping startups with time-consuming tasks.
“The reason they’re coming is that it’s difficult for them to get jobs,” Stein said.
He says these internship programs must make the young participants more employable and deliver them the skills needed to work in a fast-paced tech environment.
A version of this article appears in The Australian
We’re exceptionally fortunate to be living in a country that prides itself on the potential of its people and takes active steps to support that talent in their business endeavours.
The research and development tax incentive, arguably Australia’s premium government business incentive, is one of those active steps.
However, there is a problem.
Unfortunately, too many businesses in Australia simply aren’t aware of the significant cash flow benefit they could be adding to their business by making use of the tax incentive.
According to Lior Stein, Director at Rimon Advisory, around 60 per cent of its clientele simply didn’t know the incentive existed; or they knew about it but were under the impression they were not eligible.
In short, the incentive offers a company making below $20 million in revenues a 45 per cent benefit on any of its research and development spend.
If the company is operating at a loss, the 45 per cent benefit would come in cash. As a simple example, if the organisation had $200,000 of research and development expenditure and was in a loss situation there would be a $90,000 cash injection through the tax incentive.
On the other hand, if the company is turning a profit they would be entitled to an additional 15 per cent tax benefit on the research and development spend. Using the same example, on normal deductions of $200,000 the tax benefit would be $60,000, being 30 per cent of the deduction. With the tax benefit it would be $90,000, being 45 per cent of $200,000, giving an additional $30,000 in tax benefits.
A very important point to note is that the incentive works on a financial year basis. Meaning that a company can claim on their research and development expenditure for their past financial year’s operations.
The deadline for submission is 10 months after the company’s year-end. For companies with a year-end of June 2015, that deadline is fast approaching at the end of April this year.
The benefits of using the incentive can be game changing.
Fame and Partners, one of Australia’s up and coming fashion tech start-ups, is one good example on how the incentive can be a major benefit to companies like them.
Nyree Corby, the company’s founder, used the incentive for a number of years to keep the start-up cash flow positive. This also allowed her to concentrate on building the business value without having to raise capital too early. The good news is that Fame and Partners is now poised to be one of Australia’s next great tech companies.
But it’s important to note the incentive is not only for technology companies.
Any organisation that meets the definition of R & D according to AusIndustry may be eligible.
To simplify it, business owners throughout Australia should be asking themselves the following question: “Are we doing something in our industry that is different from the competition and new in the market?”
But does this initiative require some sort of development?
Some examples could be a beverage with a longer lasting shelf life, a new way of cleaning swimming pools, or perhaps a tool to assess the structural soundness of buildings. The list is endless.
So, if you are innovating in your business category you may be eligible.
Here are some important points to note when considering a research and development tax incentive claim:
1. You should have valid reasoning for each and every figure being claimed. Don’t simply claim a standard percentage of all your deductions
2. Understand clearly which staff were really involved in the innovation, don’t convince yourself that more or less work was done
3. Don’t miss out on the smaller claimable items, they add up
4. When articulating the innovation be articulate — you are selling it to government
5. If this is a second year claim or onwards don’t simply copy and paste the previous year’s work. Find the new innovation that was done in that year
6. The programme is a self-assessment programme (it is part of the Tax Act), assess yourself honestly
7. Don’t miss the deadline, once missed that year’s claim has been lost
8. Don’t assume you aren’t eligible; there is a good chance you are
For small and medium enterprises, the theory is that the government is allowing you to use some of your tax losses today; rather than needing to wait until you are able to offset your tax losses against your tax profits in the future.
Australia tops the globe for loss making entities with the 45 per cent cash back benefit. But when it comes to profit making entities, Australia is also seriously up there as one of the front runners.
Lior Stein is a Director at Rimon Advisory and Rimon Investments.