Financial support is available for Australian companies to create new or improved products, processes and services.
The support, in the form of the R&D Tax Incentive program, has been in place in various forms over the last 29 years, yet it retains a level of complexity that means many companies don’t understand what it's for or how to apply for it.
Currently about 11,000 companies apply for the program, of which about 7000 are small businesses. Our estimations indicate that in the small business sector over 20,000 companies are eligible based on the innovative activities they're undertaking. This represents a missed opportunity for many businesses.
One of the biggest challenges is that people think research and development (R&D) is only done by large companies developing new products in their laboratories. Most of the time that’s not the case.
Everyone does it
Almost every type of business does R&D in one form or another to maintain a competitive advantage, regardless of how small or big they are.
The food and drink sector brings innovations to market all the time. It’s one of the critical success factors for FMCG companies. The expenditure incurred to bring these innovations to market are potentially available for a tax rebate of up to 45 per cent.
So for an innovative project that incurred $100,000 of expenses, through the program a business can claim back up to $45,000. Unlike government grants where you're competing with other applicants from a fixed pool of funds, this is a non-competitive program. If you’re eligible, you will receive a benefit.
At PwC, we've supported food and drink manufacturers, consumer goods companies and retailers in accessing the R&D Tax Incentive scheme for a range of projects such as developing new flavours and textures of organic pasta or creating a range of carbonated drinks with new combinations of natural extracts and botanicals (see box for a full list).
Easier than it looks
The process for accessing the R&D Tax Incentive can appear complex from the outset, when in fact it needn’t be. The government is looking for companies to display evidence of testing a new product or process for attributes or outcomes that would otherwise be unknown, as well as the financial records that supports what you’ve spent on the project.
The program is available from the start of the financial year (1 July) through to lodgement deadline on 30 April for expenditure incurred in the previous financial year. For example, companies can apply until the end of April 2015 for expenditure incurred between 1 July 2013 and 30 June 2014.
One of the benefits of the program is that you can claim for every year the R&D is undertaken. So if your project spans multiple years, you may have expenditure you can claim each year.
Companies are able to apply for the program directly or use an agent to support their application. At PwC, we support businesses both large and small, but believe for smaller business the process shouldn’t be that complicated. We have recently launched Nifty R&D, which allows small businesses to self-complete their R&D Tax Incentive form in about 30 minutes online.
The service operates on a ‘not eligible, no fee’ basis so companies can see if their project is eligible by completing a few simple questions online at www.niftyforms.com.
Bring it on
PwC has supported food and drink manufacturers, consumer goods companies and retailers in accessing the R&D Tax Incentive scheme. Below is a range of projects it has helped companies claim a tax benefit for:
- Developing new flavours and textures of organic pasta
- Creating a range of carbonated drinks with new combinations of natural extracts and botanicals
- Improvement in macadamia nut growing and processing methods through trialling new composting and irrigation processes and new dehusking equipment
- Producing a new coffee blend using a complex multistage roast
- Improving a manufacturing line process by building custom software
- Increase in sugar cane output through trialling new rotation break crops to assist in improving soil nutrient levels and reducing pest infestations.
About the author: Mark O’Neill is the product owner of PwC’s Nifty R&D, which aims to make applying for the R&D tax incentive faster and simpler for small businesses in Australia. He can be contacted on 1800 778 939.
