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 offers 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. This would include, for example, salaries to founders or shareholders.
2. Record keeping
Good record-keeping is essential for substantiating your R&D claims. Go through your records and make sure everything is up to date and well organised. Not only should your financial records be in order, but also the technical records to evidence the R&D work that you have undertaken.
3. Connected/affiliated entities
If your R&D activities involve connected or affiliated entities, you need to ensure that all contracts and payments are completed and documented. Confirmation that all payments are made before the deadline is essential to maintain eligibility for the R&D Tax Incentive.
4. Superannuation
Super cannot be claimed as an R&D deduction unless it was paid by 30 June. To maximise your R&D claims, ensure that all superannuation payments are processed before the deadline.
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 for any work you wish to claim for the 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 to maximise the benefits from your R&D deduction.
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, there is an intensity test and the net benefit would be between 8.5% and 16.5%. 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.
EMDG tips
1. Cash accounting
EMDG works strictly on a cash basis, meaning that you can only claim amounts that were actually paid by 30 June. So, make sure that anything you want to claim is paid before the end of the month.
2. Reimbursements
Make sure any expenses paid for by employees of the company on behalf of the company have been reimbursed.
3. Contracts
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 the flow of money between entities are clear and intercompany transactions are done before June 30.
Remember – all revenue and expenditure needs to be taken up by the Australian entity making the claim. This means the expenses and international revenue should be recognised on the financial statements of the Australian P&L.At Rimon Advisory, our experienced R&D tax consultants can provide tailored advice to help optimise your R&D Tax Incentive or EMDG (Export Market Development Grant) to ensure maximum benefit for your business.
