The R&D Tax Incentive incentivises businesses from the very early stages of their startup to undertake R&D Activities. The incentive is by way of a tax offset, which means that by carrying out eligible R&D activities businesses get a monetary reward back from the government.
R&D (Research and Development) encompasses a range of activities – it could include such activities as a startup developing a new process, product, piece of equipment, or service.
One of the reasons that startups should be taking advantage of the R&D Tax Incentive is because, first and foremost, it can help with a new business’s cashflow.
“If you’re in that really early stage and don’t have a tax liability, the beauty of the program is that you can get a refund from the ATO worth up to 45 cents in the dollar ,” says manager at PwC, Anna Perejma.
“Startups can easily access this cash flow mechanism. The other point that is important for startups to understand is that the R&D tax incentive is an entitlement for eligible businesses, it’s not a competitive process. If you’re doing eligible activities you’re entitled to that funding or that tax reduction. So by not accessing it you’re almost shooting yourself in the foot from that non-diluted access to cash.”
Unfortunately statistics show that only a small percentage of eligible Australian startups and small businesses are taking advantage of the incentive. Perejma says that there is a gap in the education piece which PwC, through its Nifty Forms product, is trying to close.
“A lot of [startups and small businesses] don’t necessarily understand or think what they’re doing is research and development,” says Perejma. “That’s very common, particularly in the IT space. A lot of IT companies develop all sorts of apps and smart ways of doing things; IT now makes up for a huge number of claimers, but that’s not typical a space that people identify as R&D.”
On top of that, the old way of applying for the R&D Tax Incentive has historically been a bit of an administrative burden, and that is where Nifty Forms comes in. The platform has been designed to help streamline the process so that users are not bogged down doing a whole lot of administrative work when they could be concentrating on their business instead.
It has been designed for startup stage businesses in particular, where cash flow is important. As such, Nifty Forms has lowered the amount of fees associated with the rebate, while users also have the security of knowing that all claims are reviewed by the team at PwC.
“The platform has been designed as a sort of wizard style,” says Perejma. “If you go through page by page, it will prompt you with questions that are easy to understand that aren’t bogged down in legislative language that will be able to be filled out by someone working on the project. Ideally we’d say it should take you half an hour to fill out and then you simply press go and you’re done.”
Once everything is completed and PwC is happy with the content, the company tries to turn things around within 72 hours and then submit it to the authorities. Once that’s been done and the R&D schedule number has been received and amended with the tax return, the money back is really a judgment call for the ATO in terms of timing.
Usually it is between six to eight weeks that the funds are received, but once it’s put through Nifty Forms it then goes through to the queue at ATO.
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.