As we now know, the R&D Tax Incentive exists to incentivise businesses from the very early stages of starting up right through to becoming multinational operations. The incentive is by way of a tax offset for carrying out eligible research and development (R&D) activities, which then gives you a reward back from the government from a monetary perspective.
Although Australian startups have always been eligible to apply for the incentive, there is actually only a small portion that currently do, whether because there is confusion around eligibility requirements for the scheme or just a lack of education about how the incentive can assist startups.
It is important that founders understand that any research and development activities they engage in when it comes to creating their product could be eligible; with the average R&D return being around 40 cents in the dollar, applying for the offset can assist a startup’s cashflow dramatically.
“R&D can be a wide range of activities,” says Anna Perejma, Manager at PwC. “It’s not just the person in the lab coat blowing up something in a test tube, it’s broader than that. If a startup is developing something new, whether that be a process, product, equipment or a service, it could be eligible.”
If you are making something new and innovative within your company, whether it is for internal or external use within your company, whether the new product or service fails or not, startups should be at least making an enquiry and asking some questions about their eligibility.
To start off, a few qualifying questions a startup founder could ask themselves include:
- Am I doing something new and different to what the rest of my market is doing?
- Is this new product we are building challenging? (It may be a sign of it being a new innovation)
- Did we try to do something really disruptive or innovative and fail?
- Did we have to test this product or service? (Another sign it may be eligible if the answer is yes)
A product like Nifty Forms by PwC has been designed for startups at that early stage where cash is key and they want to take advantage of getting back as much money they are entitled to as possible. Therefore Nifty has actually lowered the fees associated with submitting R&D claims.
“In addition to lower fees, Nifty gives them the comfort that [their claim] is reviewed by PWC,” says Perejma. “It’s designed as a sort of ‘wizard style’ application; if you go through page by page, it will prompt you with questions that are easy to understand that aren’t bogged down in that legislative [jargon]. All you need is someone who is familiar with the project to fill out the information.”
“Ideally we’d say it should take you half an hour to fill it out and press go and then you’re done. It is then reviewed on the other end by PwC and we come back to qualify certain information and ask for additional documentation if needed.”
This post is powered by Nifty Forms. The new way to complete your R&D Tax Incentive claim, helping hundreds of Australian startups receive cash back from the government through the R&D Tax Incentive.