Government seeks to restrict R&D Tax Incentive

The R&D Tax Incentive aims to promote innovation by providing companies with an opportunity to offset a percentage of their R&D expenditure.

Currently, the scheme offers two levels of benefit:

  • a 45% refundable tax offset to eligible entities with an aggregated turnover less than $20M.
  • a 40% non-refundable tax offset to eligible entities with an aggregated turnover greater than $20M.

Recent legislative changes have been drafted to add a third tier in which entities with an aggregated turnover greater than $20 billion will no longer be eligible to receive the incentive. If this proposed change comes into effect, the Government estimates that only 15 to 20 of Australia’s largest companies will be affected.

New R&D Tax Incentive Registration form

AusIndustry released a new version of the R&D Tax Incentive Registration form in mid-October 2013. The new form further highlights the need for contemporaneous documentary substantiation of registered R&D activities.

With respect to the nature of their R&D activities applicants must now:

  • describe the new knowledge intended to be produced from the core activities in the project and explain why it differs from the current knowledge database. This is not a new legislative requirement, but must now be explicitly covered in the application form.
  • explain why the outcomes of the R&D project could not be determined in advance using the current level of knowledge, information and experience available. This helps assess whether the R&D undertaken was reasonable.
  • describe how each supporting activity contributed to it’s relevant core R&D activity. This minimizes contention around application of the dominant-purpose test for supporting activities.

The new form also provides further guidance to allow applicants to appropriately self-assess their R&D activities and promotes adherence to the legislation.

Deadline for registering R&D activities

For the 2012/13 financial year, applicants must register by 30 April 2014. For more information on how to access the R&D Tax Incentive, contact Kate Mahady or Cleo de la Harpe on (03) 9810 1462.

Export Market Development Grants: Helping Australian SMEs grow

The government-sponsored Export Market Development Grant (EMDG) scheme seeks to assist small and medium (SME) enterprises to compete in international markets by reimbursing up to $150K of eligible expenditure associated with developing export markets.

What is the EMDG?

The EMDG scheme is administered by Austrade and can reimburse 50% of eligible export activity expenses, up to a limit of $150K, to entitled Australian businesses.

These expenses can include:

  • overseas representation costs such as salaries, travel, rent and relocation costs
  • engagement costs for marketing consultants
  • costs of marketing visits such as travel, accommodation and meal expenses
  • communication costs such as ISD/IDD calls
  • costs associated with providing free samples to potential buyers
  • participating in overseas trade fairs, seminars and in-store promotions
  • promotional literature and advertising costs such as domain registration, website development and printing costs
  • costs associated with bringing potential buyers to Australia, and
  • IP registration, renewal and insurance costs.

Am I eligible?

To be eligible, you need to:

  • be an Australian entity (individual, partnership, company association, trust, or statutory cooperation)
  • have an annual income of no more than $50M for the financial year preceding the grant year, and
  • be the principal owner of the Australian goods or services and an Australian citizen at the time of incurring the expense.

IP expenses & the EMDG

The EMDG scheme provides a cost category to cover up to $50K of costs associated with granting, registering or renewing IP rights under a foreign law. These expenses can be incurred in Australia, so long as it is for securing rights overseas. If a business chooses to obtain IP insurance, the premium costs for worldwide protection may also be claimable under the EMDG. These costs are eligible only if they are done for promotional purposes, i.e. there is documented intent that the IP or ‘know-how’ will be used overseas to develop an export market for the good/ service.

What is the deadline for applications?

Applications for the 2014 grant year open from 1 July 2014 to 1 December 2014 and are assessed on a ‘first come, first served’ basis.