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After the excitement of EOFY has settled down (or is that just us?), it's time to start thinking about maximising your tax position.
Is your business innovative and involved with developing new products or services ?
Are you conducting research projects/activities that involve
creating new knowledge and outcomes to drive innovation?
If you answered Yes to the questions above, you may be eligible to claim the R&D tax incentive for your projects.
What is the Research and Development Tax Incentive?
The R&D tax incentive is designed to give money back to companies to help accelerate the development of activities that are new and innovative.
It reduces the cost and risk for businesses undertaking research and development (R&D) activities to create new or improved products, processes and services.
Who is eligible?
If your business conducts eligible Research & Development activities and is an Australian company or a foreign owned company with Australian tax residency, then you will be eligible to apply.
Trusts and other structures are not eligible.
What are the benefits?
For many Startups and Small Businesses, you will be eligible for a 43.5% refundable tax offset for all eligible R&D expenditure if your eligible turnover is less than $20 million.
Here’s an example of what that looks like:
A company with turnover below $20 million, spent $20,000 on R&D activities. Rather than getting the usual tax deduction of 25% for business expenses, they will receive a 43.5% refundable income tax offset instead.
Scenario A:
If the company is in a taxable profit position – their net tax position will be $3,700 better off by claiming the R&D Tax offset.
Scenario B:
If the company is in a loss-making position – it would receive $8,700 in cash as a refundable tax offset in their company tax return.
In other words, this could result in cash – in your pocket – to assist with continuing development.
This could be the cash that you need to keep developing your amazing product or service, or cash to eliminate or prolong the need to raise further capital.
At the very least, it can have a significant effect on any tax payable by your company. As we’ve seen from many of our clients, this incentive can be game-changing for businesses!
When is the application due?
R&D applications need to be lodged within 10 months of the end of the company’s financial year so for the financial year ending 30 June 2023, the application closing date is 30 April 2024.
How can we help?
Our team of R&D experts can help you assess your eligibility and register your R&D activities with AusIndustry so that when you lodge your company tax return and R&D schedule, you can claim the offset/refund from the ATO.
If you are unsure if your business meets the criteria necessary to claim the R&D Tax Incentive, or if you require assistance to prepare your application, get in touch with us today!