As we approach 30 April it is useful time to think about Government incentive programs. This is because 30 April marks 10 months from the end of the financial year and is therefore the deadline for the lodgement of your R&D project details with Austrade. Once approved these projects give access to valuable tax concessions.
If you are a business that tries to be innovative or a business that comes up with new ideas, then it is a good time to revisit what the R&D incentives are and the type of activities that will qualify.
In addition to the R&D incentives, we will also look at the export market development grant. Like the R&D incentives, this is another government incentive that is very valuable to businesses.
Research and Development
What is R&D?
The R&D tax incentive program allows participants who satisfy the requirements to claim an additional credit in their return in relation to money they have spent on R&D. In some cases this credit can be refunded in cash.
In determining when R&D is being carried on core R&D means experimental activities that satisfy the following two requirements:
- The outcomes are not known and can only be worked out by applying some kind of systematic approach.
- Research is conducted for the purpose of generating new knowledge. For example better materials, or processes.
Leading on from the above it is also important that whatever the “thing” is, it is being developed for the purpose of commercialisation. Therefore the development of computer software for use within your business would typically not be R&D.
While we note there are quite a number of elements to the above, the potential application of these definitions is broad. There are also various more specific requirements such as specifically excluded activities. However as a starting point if your business does things that are new and involve some form of uncertainty regarding the outcome then it is worth considering these provisions further as you may be able to access these tax concessions.
What is the concession?
If the concessions are available then the following can be received:
- A 45% refundable tax offset for those businesses with an aggregated assessable income turnover of less than $20 million.
- A non-refundable 40% tax offset which is available for businesses with turnover between $20 million and $20 billion.
Export Market Development Grant (“EMDG”)
What is the EDMG?Like the R&D concession the EDMG is also administered by Austrade and is a Government funded financial assistance program for aspiring and current small and medium business that are establishing themselves as exporters of either goods or services.
One of the key incentives it provides is a reimbursement up to 50% of eligible export promotion expenses for expenses greater than $10K, with a maximum reimbursement of $150K.Other points to note include the following:
- The Grant is provided in the year following expenditure.
- Grants are provided up to seven years to each eligible applicant.
Who is eligible?
Australian individuals, partnerships, company associations, co-operatives, statutory corporations or trusts carrying on a business in Australia may apply for the EDMG provided they:
- Have an ABN.
- Had an annual income of not more than $50 million during 2012-13.
- Spent at least $20,000 on eligible export promotion activities during 2012-13. First time applicants may combine expenses incurred in 2011-12 and 2012-13 to meet this threshold.
- Are the principal – they must own the product they are promoting (some exceptions apply).
- Promoted the product for export and their product is:
– A good made in Australia
– A good made outside Australia where Australia will derive a significant
net benefit from its sale overseas
– A service except those specified as ineligible in the EDMG Regulations
– A tourism service
– An event held in Australia
– An intellectual property right that mainly resulted from work done in Australia
– A trade mark first used in Australia, or which has significantly increased in
value from its use in Australia
– Know-how that mainly resulted from work done in Australia.
Type of expenses that are claimable – nine categories
- Costs paid to overseas representatives to market / promote the product (max $200,000).
- Cost of engaging an arms-length consultant to undertake export market research or marketing activities (max of $50K).
- Cost of travel during marketing visits ($300 per day).
- Cost of communications to promote product.
- Cost of providing free samples of product promoting for export.
- Cost of granting, registering or extending rights under foreign laws in relation to eligible intellectual property (up to a maximum of $50K per application).
- External costs directly related to participating in an international trade fair, seminar, in-store promotion, international forum, private exhibition or similar activity.
- External costs of promotional material, such as brochures, videos, advertising and website development.
- Costs of bringing potential buyers who are non-residents to Australia for an eligible export promotion purpose ($7.5K per buyer per visit, maximum of $45K per application).
As you can see the potential application of the above concessions is quite broad and also quite valuable. Therefore if you are currently looking to expand your business overseas the above concession may be able to provide you with some assistance.