How does submission work?

  • Step 01 Eligibility assessment

    To ensure the company meets the eligibility criteria and that the possible benefit of a claim outweighs the required effort.

  • Step 04 Receive Tax Offset

    The net benefit will vary depending on the size of the claim and on the company's profit/loss. 

     

  • Step 02 Registration form

    A submission is made to Ausindustry to formally register the claim. 

  • Step 03 income tax return

    Tax schedule is prepared. The company's accountant needs to include the schedule in the company's annual tax return. 

     

R&D Tax Incentive Regulators

There are 2 regulators that regulate the R&D tax incentive.

Australian Government Business

  • Governing the actual technical R&D that is being put forward
  • The underlying R&D activities that occurred

The Australian Tax Office (ATO)

  • The financial side of things - ensuring compliance over the R&D expenditure being claimed and that it meets the R&D regulations

Check Eligibility

Often a person will be making something innovative but simply assume that their R&D is not eligible for the incentive. More often than not the innovation could be eligible.There are 3 main pillars to understand if the Research and Development is eligible.

Here is a summary.

  1. New Knowledge

    • The first step to new knowledge is identifying a gap in the market
    • An area that you feel is lacking and that you believe you can capture or change
    • It’s important to note here that you don't have to be sending rockets to the moon
    • In fact the final outcome of what you are doing may not be distinguishable from something else in the market however the opportunity you have identified adds a different benefit to getting to the outcome e.g. faster, smoother, healthier, more efficient or longer lasting … just as some ideas
  2. Experimentation

    • Now that you have identified your gap in the market you decide to go ahead and have something made
    • This would be the embarking of a process of trial and error. There will be setbacks along the way as you are attempting something new
    • The setbacks are very important as they prove that it wasn't an easy process but rather a true process of R&D
  3. Uncertainty

    • As with anything new, the outcome shouldn't be known in advance
    • Inherent in something new being created should be a level of not knowing what the final outcome will be
    • This is a regular process of real R&D. The product or innovation will likely take many different forms along the way as it is something new that is being created

At the end of these 3 steps, if the R&D was successful, it will close the new knowledge gap identified in pillar 1. In other words that gap that was identified is no longer a gap as the new product that was created has filled that gap.

 

Check Eligibility

The Rimon Difference

At Rimon we are a team of both technical and financial experts.

We are able to truly understand any R&D and then attriute the right value to your R&D resulting in a claim that you can be proud of.

Our business has been built on excellence - the excellence that our clients deserve when chosing their service providers.

We have clients spanning all sizes, from large listed corporations, to tech companies and start-ups, to farming and all the way through to automated manufacturing clients.

Rimon Advisory are R&D Tax Incentive and Export Market Development Grant specialists.

This is what we do for every minute of every day.

We are able to manage your R&D Tax Incentive to the highest quality while you can have the comfort to continue to run your business knowing that your R&D Tax Incentive is getting the highest care.

Common R&D Tax Incentive Questions

 

When are the submission deadlines?

The deadline for the R&D tax incentive is typically 10 months after the year end of your R&D entity.

The deadline is regarding the submission to AusIndustry which comprises the registration of your R&D activities.



Year end deadline
30-Jun 30-Apr
31-Dec 31-Oct

Which expenses may be eligible?

With many years of experience we have found that these expenses are regularly found in company’s submitting R&D tax incentive claims.

If you have expenses such as these or similar then you should consider if you are eligible for the incentive

  • R&D staff salaries and wages
  • R&D contractor fees
  • Industrial design
  • Software development
  • Formula formulation
  • Prototype creation
  • Product testing
  • Manufacturing line automation
  • Engineering costs
  • Lab costs and testing
  • Patent new knowledge costs
  • R&D machinery
  • R&D rent
  • R&D overheads
  • R&D utilities
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How is the R&D Tax Credit Calculated?

The benefit varies depending on a company’s profit or loss situation.

Have a look at the 3 scenarios below:

01.

A loss making entity
refundable cash back benefit

02.

A profit making entity
non refundable tax saving benefit

03.

Small profit making entity - a mixture of tax saving and cash back benefit

1. Loss Making Entity

Unicorn To Be Pty Ltd embarks on building their product. They have incurred $400,000 in total expenses of which $250,000 were eligible R&D expenses.

In our example Unicorn To Be will receive $108,750 back in cash via using the R&D
Tax Incentive.

Unicorn to be Pty Ltd - R&D benefit example

Rate Amount
Revenue -
Expenses 400,000
(Loss) (400,000)
Tax 27.50% (82,500)
Add Back R&D Expenses 250,000
Loss after R&D expenses addback (150,000)
Tax after R&D expenses addback 27.50% -
R&D Offset 43.50% 108,750
R&D Refundable cash back benefit 108,750
R&D Refundable cash back benefit 108,750
Summary
The refund not using the R&D Tax Incentive -
The refund using the R&D Tax Incentive 108,750
R&D Refundable cash back benefit 108,750

In this example Unicorn To Be Pty Ltd doesn't have any revenue. However the main point to look out for is the fact that the entity is in a loss. If Unicorn To Be had revenue but still had losses the calculation would look very similar.

2. Profit Making Entity

Go-Kart Mechanics Pty Ltd makes aerodynamic innovative go-kart parts. They have $1,000,000 in revenue and $700,000 in expenses. Of the $700,000 expenses, $500,000 are eligible R&D expenses.

In our example Go-Kart Mechanics will be saving $80,000 in tax through using the R&D Tax Incentive.

Go-Kart Mechanics Pty Ltd - R&D benefit example

Rate Amount
Revenue 1,000,000
Expenses 700,000
Profit 300,000
Tax 27.50%
Add Back R&D Expenses 500,000
Profit after R&D expenses addback 800,000
Tax after R&D expenses addback 27.50% (220,000)
R&D Offset 43.50% 217,500
Tax Payable after R&D offset (2,500)
R&D tax saving benefit 80,000
Summary
Tax payable not using R&D Tax Incentive (82,500)
Tax payable using R&D Tax Incentive (2,500)
R&D tax saving benefit 80,000

3. Small Profit Making Entity

Eye Shade Pty Ltd makes longer lasting eye shadow makeup. They have $400,000 in revenue and $350,000 in expenses. Of the $350,000 expenses, $200,000 are eligible R&D expenses.

Eye Shade will make $32,000 in R&D benefit split between a tax saving benefit of $13,750 and a cash back benefit of $18,250.

Eye Shade Pty Ltd - R&D benefit example

Rate Amount
Revenue 400,000
Expenses 350,000
Profit 50,000
Tax 27.50% (13,750)
Add Back R&D Expenses 200,000
Profit after R&D expenses addback 250,000
Tax after R&D expenses addback 27.50% (69,750)
R&D Offset 43.50% 87,000
R&D refundable cash back benefit 18,250
Total R&D benefit 32,000
Summary
Tax payable not using R&D Tax Incentive (13,750)
Tax payable using R&D Tax Incentive -
R&D Tax Saving Benefit 13,750
Tax refund not using the R&D Tax Incentive -
Tax refund using the R&D Tax Incentive 18,250
R&D Refundable cash back benefit 18,250
Total R&D benefit 32,000

Entities with Aggregate Turnover of > $20M

Should the R&D entity have an aggregate turnover of above $20 Million then the following would apply:

  • Only a non refundable benefit is available (not the refundable cash back benefit)
  • The R&D rate reduces to 38.5% from the regular 43.5%

Is the R&D Tax Offset Taxable?

The R&D tax Incentive does NOT form part of assessable income.

Essentially the incentive is a tax offset. The mechanism of the cashback portion is done via offsetting the incentive against the company’s losses.

Thereby unlocking the company’s losses today rather than holding onto the losses for the future. The incentive also allows a company to unlock their losses at a higher rate than their tax rate.

Companies using the R&D tax incentive should consider that the refundable offset is a debit to a company’s franking account.

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