Have you got an idea for an innovative product, process or system? Are you an innovator looking to commercialise a new idea? Are you spending over AUD $20,000 researching and developing your idea?
If you answered yes to any of these questions, you could be on your way to being eligible to claim the Australian Research and Development (R&D) Tax Incentive – an up to 43.5% refundable (cashback) tax offset.
What is the R&D Tax Incentive?
The Australian R&D Tax Incentive is an Australian Government incentive designed to encourage Australian businesses to create innovative products, processes or systems. For many companies based in Australia, the R&D Tax Incentive can provide a beneficial source of funds necessary for businesses to upscale and continue to conduct R&D in the R&D phase.
If you know that you will be undertaking R&D activities during the financial year, having a plan and the right technology will give you the process and peace of mind you need to ensure your company is eligible and can continue innovating.
Broadly speaking, your eligibility to claim the R&D Tax Incentive will depend on whether you are an eligible entity.
So, where do begin? Below are some tips to assist you in creating a business that is ready to claim the Australian R&D tax incentive.
Business Structure
You can only claim the Australian R&D Tax Incentive if you are carrying out your R&D activities in an eligible R&D entity. There are several types of companies or corporations that qualify as an R&D entity.
It is important to note that you are not eligible to claim the R&D Tax Incentive if you are carrying out your R&D activities as a sole trader or in a trust.
R&D Activities
To be eligible to claim the Australian R&D Tax Incentive you need to ensure that the activities associated with the product, process or system you are developing can be classified as R&D. Below are some criteria to assist you to determine if your R&D activities might be eligible:
- My product, process or system cannot be created with existing information in the public domain.
- My product, process or system is difficult to develop.
- My product, process or system cannot be developed using plug and play technologies (i.e. the building blocks are already available).
- My product, process or system has measurable goals I am trying to achieve.
- My product, process or system will require an iterative process to create as it is fundamentally difficult to develop without experimentation.
- My product, process or system will have commercial value.
R&D Expenditure
You must have eligible R&D expenditure of at least AUD$20,000 to be eligible to claim the Australian R&D Tax Incentive. Eligible expenses may include consultant fees, testing costs, overheads, staff salaries and more.
Is there a system I can use to accurately keep track of my expenditure and activity?
Yes! You can track and manage all of your experiments, activity and expenditure with Synnch.
Synnch is a user driven platform designed specifically for anyone currently claiming, or wanting to claim the R&D tax incentive.
Synnch will streamline all of your record keeping requirements while guiding you toward a compliant claim.
You can also have team collaboration at a project level to keep everything on track toward receiving those R&D dollars back in your pocket.
If you’d like to learn more about how Synnch can help you design and implement an R&D tax compliance strategy with our software, contact us to have a chat.
