With all the furore surrounding ICOs and token-based crowdfunding nowadays, it can be easy to miss one of the best forms of funding available for Australian blockchain entrepreneurs, the R&D Tax Incentive.
Blockchain is a truly revolutionary combination of technologies. A blockchain is an auditable growing list of transactions that is not controlled by a central trusted authority. Transactions in the blockchain cannot be corrupted or retroactively altered in any way, and the blockchain does not have a single point of failure.
The Australian government’s generous R&D Tax Incentive program reimburses up to 43.5% of the cost of eligible R&D undertaken in Australia.
Simply speaking, the government’s three criteria for a ‘Core R&D Activity’ are:
1. New knowledge
But does blockchain development tick these boxes?
Let’s examine 3 blockchain development categories to see how they might fit into the R&D Tax Incentive:
Building a standard token on top of an existing blockchain
An example of this would be implementing a standard cryptocurrency on the Ethereum blockchain using the ERC20 standard.
It would be unlikely that this type of development alone would qualify as an eligible Core R&D Activity. There is no real creation of New Knowledge as the token standard is available in the public sphere. There is also likely to be little to no experimentation involved. The most obvious disqualification, however, is that there is no uncertainty involved for a competent professional in the field.
Building a decentralised application on top of a blockchain
An example of this would be building an application that acts as a trusted document notary on top of the Ethereum blockchain (like the popular Nottar.io Dapp created by Daniel Murmelstein).
Whether this type of development is eligible as a Core R&D Activity is highly dependent on the specifics of the application in question. For more complex projects, there will likely be experimentation, and there is definitely room for generating new knowledge in the emerging and exciting blockchain environment. There is also scope for uncertainty from the outset even for competent professionals in the field.
Building a new consensus protocol
An example of this would be building a new resilience-optimal Byzantine consensus blockchain from scratch (like the Red Belly Blockchain being developed in conjunction with Sydney University).
It is almost certain that this type of development would be eligible as a Core R&D Activity. New knowledge is undoubtedly being generated as part of an iterative process of experimentation . Additionally, even for top professionals uncertainty would exist from the outset. Due to the deep complexity of developing a provably robust consensus protocol, it would be very difficult to know or determine the outcome in advance on the basis of any current knowledge, information or experience.
To find out more information on qualifying and claiming the R&D Tax Incentive, get in contact with us at email@example.com .
David Kofsky is a Senior Technical Business Analyst at Rimon Advisory