Australian Industry Services.

The 125% Research and Development Tax Concession
- not just for companies with a tax bill.

This is one of the main incentives manufacturing companies can use to increase their cashflow.

The R&D Tax Concession equates to a 37.5% after tax grant if you are in loss, or starting up a company with low or no sales.

Or a 7.5% after tax subsidy of your R&D costs if you are in profit.

How does this work?

If you are a start up company with low or no sales in your first year (or you are in tax loss from the current or previous years) and you have a group turnover of less than $5 million, you can access the tax rebate, which is 30% of your total R&D spend plus the 25% concessional component. This equals an after tax grant of 37.5% of whatever money you spend on eligible R&D. Check the calculator at right with your own figures.

If you are in profit you can get an extra 25% tax deduction for a tax year, even if you have already lodged your tax return. Plug in your figures to the calculator.

Broadly speaking, to qualify for the tax concession you need to satisfy the following criteria:

1. You are developing new or improved products or processes.
2. The project involves EITHER significant technical risk OR innovation or both.

The costs which can be included in R&D costs are labour, overheads, materials for prototypes, testing costs, contractors’ costs and a few other items. Sometimes other materials can be claimed.

The new R&D Tax Incentive

Some of the above details will be changed under the new R&D Tax Incentive which takes effect from July 1, 2011. For example, companies in tax loss will be eligible for rebates up to 45% of their R&D spend, while companies in profit will get an after tax credit or refund of 15% of their R&D spend. The $5 million turnover limit has also been removed and companies with a turnover of less than $20 million will have full access to the maximum benefits of the new system.

The definition of R&D has changed as well, but the practical effect is minimal for companies carrying out genuine development projects. The key to having eligible R&D under the new law, in simple terms, is to have a development project which involves the scientific process.

That is, you have an idea on how to solve a technological problem, you experiment to test or disprove your idea, and continue or stop development in light of the evaluation of results. This may involve a change in design or approach to get to the desired end point.

Call us on 1800 606 812 or email for a no obligation assesment of your claim.