Research and development (R&D) programs are the cornerstones of innovation in technology and business operations. Many businesses are delay investing in a dedicated R&D department mainly due to uncertainty surrounding the funding once the research is successful. However, the Australian government has made considerable efforts to introduce the R&D Tax Incentive Program to encourage businesses to invest. If you want to learn more about this program, then look at the following information.
What is an R&D Tax Incentive Program?
Although the program has been working since 1985, it still didn’t attract many businesses. However, changes to the program in 2020 have seen an increased interest from businesses in Australia. The program aims to enhance the competitiveness in Australian markets, which will increase productivity resulting in the economy’s growth. The program also offers some incentives for small businesses, making it easier to carry out research in specific areas, positively affecting a company’s growth.
Eligibility
The program is designed to help small businesses they can survive in the market through innovation. Therefore, any business with a turnaround of less than $20 million can have a cash tax refund of about 45%. The amount can then be invested in R&D without introducing additional funding. Similarly, companies with a higher turnaround will not receive a cash tax refund; instead, the amount will be adjusted in their annual tax return. Either way, both types will enjoy the R&D Tax incentive program without any hassle. Following are some additional scenarios;
- A business is eligible if it’s registered under Australian law.
- It’s eligible if the company is registered under foreign law, but its income is received in Australia.
- The business is registered under foreign law and operating in a country where Australia has a double tax agreement.
After providing the relevant documents and paperwork, all these businesses are eligible for an R&D Tax Incentive program.
Administration
The incentive is jointly administered by the Australian Tax office (ATO) and AusIndustry. You need to register your R&D project with AusIndustry before applying for a tax refund in your annual tax return. ATO refunds the tax after checking your R&D activities, their importance and legitimacy in your business operations.
How to Apply?
The R&D Tax Incentive is a self-assessment program, meaning you need to evaluate the project yourself for its eligibility. You must assess whether your company is eligible under the program and fulfils all the requirements. Next up, you must keep a meticulous record of all the expenditures incurred on the R&D program; this includes equipment, salaries and consultancy fees. The ATO will refund almost 45% of the total tax, so keeping an excellent record is vital. Once you have assessed these factors, you must register with the program. Remember, you have to register within ten months of the last concluded financial year to be eligible for incentives in the new financial year.
Australia’s R&D Tax Incentive Program is already showing its impact on the economy and is set to see massive growth. If you have not applied for the program, now is the right time to do so and enjoy its benefits.
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