R&D Incentives and Government Grants – Maximising your return on R&D investment

Investing in R&D is an important part of operations for many manufacturing companies and can drive the achievement of long term success. 

The effectiveness of every dollar spent on R&D is crucial to companies in the manufacturing sector as cash flow liquidity has been particularly important in recent times. 

The  Australian R&D tax incentive has been designed to provide increased financial support to companies undertaking R&D activities.

For R&D entities with aggregated turnover of less than $20 million, a 45% refundable R&D tax offset on eligible R&D expenditure can be accessed. This provides cash flow and the opportunity for loss making companies to continue to invest and grow.

For R&D entities with aggregated turnover equal to or greater than $20 million, a 40% non-refundable R&D tax offset can be accessed. 

The 40% credit can be used to offset current tax payable or the credit can be carried forward to offset future income tax payable.  Foreign entities can also benefit from the Australian R&D tax incentive where certain conditions are satisfied.

The definition of R&D has also been changed under the new incentive with the formal introduction of the concepts of “core” and “supporting” R&D. 

That said, the driver of incentivising R&D is to reward activities that seek to generate new knowledge, with uncertain outcomes through scientific principles.  Such activities can be undertaken to create new or improved materials, products, devices, processes or services.  Activities that are directly related to the experimental activity also qualify.

While the new program predominantly supports R&D activities being undertaken in Australia, eligible R&D entities in Australia can also claim a proportion of R&D activities undertaken overseas. 

In order for overseas activities to be included in a R&D claim the entity will need to successfully apply for an advance finding and an overseas advance finding with Innovation Australia.

The benefits available from undertaking R&D and claiming the new incentives are numerous. 

The incentive provides real cash for start-ups and SMEs. 

R&D benefits improve the rate of return on investment, positively influence payback periods for capital acquisitions and increase profit margin.  In this era of competition for market share, cost control pressures and cash flow, the R&D incentive is one way to assist you and your business in achieving profitable growth.   

R&D activities must be registered with Innovation Australia within 10 months of the financial year end of the claimant and it is now, more than ever, essential that adequate records and documentation of activities and expenditure exist. 

Compliance with the new R&D incentive is focused not just on the eligibility of activities and expenditure but how the claims are substantiated. 

There is also scope to apply for advance approval of activities. 

This can assist you and your business in budgeting for R&D, obtaining debt or equity funding from external bodies and give a level of certainty as to eligibility and return.

Accessing the R&D Tax Incentive

Making best use of the benefits available under the R&D tax incentives requires the collaboration of personnel with specialist legal and industry expertise.

Adopting a strategic approach to identifying and qualifying R&D is also paramount and our team of experts can assist you and your business in maximising entitlements.

Government Grants and Incentives

Australian State and Federal governments offer substantial assistance programs to business in a wide range of areas.

These programs amount to around $9 billion annually and the vast array of programs offer financial assistance in the areas of:

• Research and development
• Feasibility study assistance
• Commercialising technology
• Job creation and growth
• Environmental initiatives
• Investment support
• Expansion
• Transition
• Business and export market planning
• Technology diffusion
• Networking.

With hundreds of assistance programs on offer across different tiers of government, businesses have a myriad of opportunities available to them.  However, without specialist guidance, it can be extremely daunting to identify and access the most appropriate programs.  Deloitte’s Government Incentives Program can provide this guidance.

How the Government Incentives Program works

Businesses that are traditionally successful in accessing government assistance often have dedicated staff within their organisations whose sole activity is to develop government relationships, access government programs and identify commercial opportunities.

Our Government Incentives team gives your business access to professionals who can assist you in developing and managing your government affairs function in an effective manner.

There are four broad elements within the Government Incentives Program:

1. Strategy preparation – short term and long term goals
2. Application preparation and process streamlining
3. On-going updates of relevant government policy and legislative change
4. Policy management

Current areas of focus

Governments are currently supporting a range of projects, but particularly those that have a focus on clean technology, energy efficiency and regional development.