How to Maximise the R&D Tax Incentive
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The R&D Tax Incentive allows you to claim up to 43.5% of the costs of developing a new product.
R&D Tax Incentive
The R&D tax incentive is a rebate you get for developing new products and services.
As long as you:
- spend over $20,000
- operate a pty ltd company (no trusts, partnerships, sole traders)
- undertake R&D activities in Australia
The weird thing is, over 70% of eligible small businesses could claim the R&D Tax Incentive,
In fact, only 1% of companies apply for the R&D tax incentive.
What do you get?
It provides a rebate of between 13.5% to 43.5%.
So if you spend $100,000 on developing a new product, you could get back between $13,500 and $43,500
depending on the company profitability.
Are you doing R&D?
To be eligible for the R&D Tax Incentive, you need to ask yourself if what you are doing can be considered innovative in your field.
Are you developing something that does not currently exist?
Have you needed to test and develop what you are creating?
You could be developing new software for the hospitality industry; you could be crafting bespoke solutions using raw materials; you could be engineering new devices for tracking and monitoring equipment.
The definition of experimental work is not restricted to labs and culture dishes.
But, we are not doing R&D?
Often, the first response I get from a company is “We are not doing R&D!”
When people think ‘research and development’, they often think white lab coats and mixing chemicals.
That is not the case for this grant.
One of the main elements to eligibility is: Can you predict the outcome of the activities?
or, asking it a different way:
“What stuffed up along the way!”
Some other prompts that may help you understand it better are:
- What features did you add to your product or service?
- How does your product differ from others in the market?
- Why couldn’t you just copy what already exists in the market?
- Did you experiment with different solutions?
- What did you not know how to develop?
- Was there any there trial an error involved in the project?
- What were some of the technical hurdles along the way?
- What didn’t work when you initially developed the product?
- What had an unexpected outcome during development?
- What did you test for to prove the development worked?
This is how the government describe R&D:
“Core R&D activities are experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work “
But, are you an expert?
The government want to know whether an expert could predict the outcome?
So, if you know what you are doing, then the R&D Tax Incentive could be a good grant to go for.
Speak to an R&D tax incentive consultant for more information.
How to Maximise the R&D Tax Incentive
Call For Assistance 1300 658 508
R&D Alert – 18 December 2018
R&D Tax Incentive alert
You may have seen in the paper recently that the government has been cracking down more on the R&D Tax Incentive.
This time, it’s not just dodgy consultants but some rather large operations.
PwC has been investigated by the ATO has since closed down the majority of its R&D team.
What did PwC do different?
The main issues that were identified were:
- taking their names off the application, so it wouldn’t be audited
- claiming ineligible expenses
- over promising on its marketing material
Why has this happened?
For the past two years, the government has been increasing their emphasis on compliance to R&D activities, particularly to do with software development.
So now, they are trying to claw back some of the funds through retrospective audits.
In response to what they deem poor compliance on eligible activities, a few high-profile consultants and a number of large companies have been required to return their rebates.
Basically, the government is cracking down on over claiming, embellished, and outright misrepresented applications.
What has been made clear?
The government has indicated a number of key areas they believe applicants are misusing the Incentive.
- Claiming for activities that leave the realms of experimentation, i.e. not distinguishing between R&D and other activities
- Claiming for software development that is standard development, i.e. not generating new knowledge and/or applying existing knowledge
- Claiming standard business activity
- Claiming R&D staff time without contemporaneous evidence (current timesheets, staff hour reports, etc.)
While not “changing the rules” the government is aiming to tighten its focus on compliance to save $2.9 billion over the coming years.
What this means?
This is being directed at companies with dubious development claims and excessive expenditure statements.
While not a cause for alarm at a widespread review, claims going forward will likely be subject to higher levels of scrutiny.
We have always held our claims to Best Practice standards of analysis.
Our focus is on:
- Ensuring work detailed and claimed follows the scientific method and produces tangible new knowledge
- Distilling your experimental work from your standard business activity
- Making sure clear evidence exists for the expenditure being established
We don’t want to see you investigated or repaying funds you have been given.
We remain up-to-date by attending State Reference Groups, ensuring we are abreast of shifts in compliance stances, and actively engaging with the ATO and AusIndustry.
Our focus and standards will always aim to exceed common practice and remain ahead of the government’s guidance.
Things to keep in mind
- You can be audited up to five years after your rebate has been awarded
- The government’s guidance can be inconsistent, so we will maintain Best Practice standards for all experimentation and evidence going forward
- Our focus is to make safe, conservative claims that are in the spirit of the Incentive
- Not all development is experimental – companies often want to claim as though all their efforts are generating new knowledge and experimental, this is rarely the case
The best chance you have of using the Incentive correctly is self-assessment.
- Scrutinising whether you are still in the phases of experimentation
- Making conservative estimations of staff time and expenses
- Having records to prove the link between experiments and expenses
- Drawing clear, tangible lines between your R&D activities and your standard business operations.
We are here to help with these, but the best defense is to understand the Incentive yourself.
If you have any queries about the current state of the Incentive or any concerns, give me a call.
I am happy to answer any questions or field concerns.
Federal Budget – 11 May 2018
Scott Morrison revealed a few weeks ago that he had intentions to reduce the R&D Tax Incentive in his next budget. See what changed
Platina Resources Limited receives $1,100,000 – 06 January 2019
Platina Resources Limited (Platina or the Company) (ASX:PGM) (OTCMKTS:PTNUF) is pleased to advise that is has received a Research and Development refund claim totalling $1.1 million before costs.
The claim covers eligible test work for the 2017/2018 financial year under the Federal Government’s R&D tax incentive scheme. Under the R&D tax incentive scheme, companies with a turnover of less than $20 million which undertake research and development are entitled to a cash refund of 43.5 cents per dollar spent on eligible research and development in Australia.
The Company research activities have focused on the development of commercial extraction technologies for the simultaneous production of scandium oxide, nickel, and cobalt from lateritic ores at its Platina Scandium Project in New South Wales. Scandium is presently only produced as a by-product from other processes. Neither dedicated large-scale scandium production processes nor processes capable of producing scandium from primary ores have been developed or commercialised.
The results of the research and development activities have been incorporated into the Platina Scandium Project Definitive Feasibility Study (“DFS”) announced on the 13th December 2018. The DFS confirmed the technical and financial viability of constructing a simple, low-strip ratio, open-cut mining operation and processing facility producing high purity scandium oxide.
Corey Nolan, Managing Director of Platina Resources stated “The incentive provides direct assistance to companies like Platina to continue their research and development activities with a view to building value for shareholders. The receipt of the R&D rebate strengthens the Company’s financial position as the Company moves towards the development phase”.
Platina Resources Limited ( ASX:PGM ) ( OTCMKTS:PTNUF ) is an Australian-based exploration and development company focused on precious and specialty metals, particularly platinum group metals and the strategic metal scandium.
Paradigm Biopharmaceuticals receives $2,320,000 – 15 November 2018
Paradigm Biopharmaceuticals Ltd (ASX:PAR) has strengthened its capital position after receiving a $2.32 million Research & Development (R&D) Tax Incentive Refund for the 2017/2018 financial year.
The company’s capital position now stands at $10.5 million, boosted by the R&D refund as well as completion of tranche II of the October $9 million capital raising.
This provides Paradigm with the funds to prepare regulatory filings with the US FDA and the Australian TGA following phase 2b read-out of results.
Investigator Resources Limited receives $657,958 – 12 November 2018
Investigator Resources Limited (ASX:IVR) is pleased to announce it has received A$657,958 as a tax concession for the 2017/18 year under the Federal Government’s Research and Development (“R&D”) Tax Incentive program.
The R&D Tax Incentive program helps businesses offset a portion of costs relating to certain R&D activities. The incentive is jointly administered by AusIndustry (on behalf of Innovation Australia) and the Australian Taxation Office.
The refund recognises the Company’s innovative approach to its on-going research projects that are testing alternative hypotheses to the accepted geological norm. Our new ideas are advancing the understanding of South Australia’s ore geology to rejuvenate the exploration space and choice of target commodities and styles in the State.
Investigator acknowledges the value of government assistance that initiatives such as the R&D Tax Incentive program provides, supporting innovative thinking and early stage work.
The received A$657,958 is additional to the previously reported cash balance of A$1.95million as at the quarter ended 30 September 2018.
Imugene receives $1,850,000 – 09 November 2018
Imugene Limited (ASX:IMU), an immuno- oncology company is pleased to advise that it has received a research and development (R&D) tax refund of $1.85 million as part of the Australian government’s R&D tax incentive. This incentive recognises the important immuno-oncology research activities undertaken by Imugene during the financial year ended 30 June 2018.
The receipt of the $1.85 million in additional funding will support our commercial and clinical milestones, with the company experiencing its most significant period of R&D expenditure in the September 2018 quarter, with R&D cash outflows of $1.65 million.
Phylogica Limited receives $2,900,000 – 08 October 2018
Phylogica Limited (ASX:PYC) (Phylogica or the Company), advises that it has received a $2,900,000 cash refund under the Federal Government’s R&D Tax Incentive Scheme.
The refund relates to the costs of research and development during the 2018 Financial Year which qualify as eligible R&D expenditure under the Federal Government’s Scheme.
The funds received will be used to accelerate the Company’s path towards first in human trials of its Cell Penetrating Peptides (CPPs).
Australian Mines Limited receives $295,765 – 01 October 2018
Australian Mines Limited’s research and development (R&D) work aimed at developing a scandium oxide process flowsheet has seen it receive an R&D tax rebate from the Commonwealth Government.
A $295,765 rebate has been received for the company’s R&D expenditure in the 2016-17 financial year.
The expenditure relates specifically to development work completed at a high-pressure acid leach (HPAL) and solvent extraction (SX) demonstration plant in Perth, in conjunction with Simulus Group’s laboratories.
Avita Medical receives $1,000,000 – 25 September 2018
AVITA Medical, a global regenerative medicine company, today announced that it has received a Research and Development Tax Incentive cash rebate from the Australian Tax Office in the amount of A$1.0 million for the year ending 30 June 2017.
AVITA Medical is a regenerative medicine company with a technology platform positioned to address unmet medical needs in burns, chronic wounds, and aesthetics indications. AVITA Medical’s patented and proprietary collection and application technology provides innovative treatment solutions derived from the regenerative properties of a patient’s own skin. The medical devices work by preparing a REGENERATIVE EPIDERMAL SUSPENSION ™ (RES™), an autologous suspension comprised of the patient’s skin cells necessary to regenerate natural healthy epidermis. This autologous suspension is then sprayed onto the areas of the patient requiring treatment.
DroneShield receives $400,000 – 15 August 2018
Phylogica receives $2,170,000 – 14 January 2018
Phylogica received $2,170,000 to advance drug discovery research and development, utilising the Company’s Phylomer peptide libraries and proprietary screening capabilities.
Phylogica is a biotech company focused on commercialising its intracellular drug delivery platform and panning its Phylomer libraries to identify drug cargoes for development against a wide range of disease targets.
Phylogica controls access to the world’s most structurally diverse source of peptides called Phylomers, which have the ability to act as effective drug delivery agents and drug cargoes, penetrating cell walls to reach previously ‘undruggable’ targets across a range of disease types. Phylogica’s platform of proprietary cell penetration peptides is showing promise in delivering a diverse range of drug cargoes into cells, and the company’s lead asset program has identified a phylomer which can inhibit Myc, a protein responsible for the regulation of cancer cell growth.
The company has had collaborations with several pharmaceutical companies including Roche, Medimmune, Pfizer, Janssen and is currently working with Genentech.
Tax Agent gets 2 years prison – 11 October 2017
A registered tax agent has been sentenced to 29 months’ imprisonment with 18 to serve for attempting to defraud the Commonwealth of approximately $550,000, and dealing with the proceeds of crime.
Arjuna Samarakoon was sentenced at Melbourne County Courthouse on Wednesday for his role as a tax professional in a company which fraudulently claimed refunds on two separate occasions in 2013 from the Australian Taxation Office (ATO) under the Research & Development (R&D) Tax Incentive, with a total value of $549,719. Mr Samarakoon transferred the majority of the funds to his individual bank account making a personal gain of $380,000.
ATO Deputy Commissioner Will Day said the seriousness of this abuse of the R&D Tax Incentive by individuals such as Mr Samarakoon has resulted in the Serious Financial Crime Taskforce making its investigation into serious R&D Tax Incentive abuse a priority for cross-agency action.
“The R&D Tax Incentive is designed to encourage Australian businesses to invest in new research and development of technology,” Mr Day said.
“Those who deliberately do the wrong thing and claim the incentive which they are not entitled to will be caught and held to account for their actions.”
Earlier this year, ATO and the Department of Industry, Innovation and Science (DIIS) released four Taxpayer Alerts as a warning to those seeking to deliberately exploit the R&D Tax Incentive program.
The Government’s multi-agency Serious Financial Crime Taskforce (SFCT) has raised over $391 million in tax liabilities, completed 587 audits and obtained convictions of four people.
Smoke Control Systems – 11 September 2017
Smoke Control Systems Pty Ltd is working to reduce the number of accidents occurring through specialising in the design, supply, installation and maintenance of life safety solutions.
The development of performance-based building codes in Australia and New Zealand in the 1990’s has seen the rise in demand for easily certifiable fire and smoke protection systems.
Partnering with leading local and international organisations, Smoke Control was created to design and install systems that satisfied changing fire and smoke control requirements, while meeting project objectives, including freedom of architectural design.
Today, constant research and development continues to enhance their offering of fire windows, fire shutters and fire curtains, bringing the most innovative technology to both regular and unique project challenges.
Smoke Control Systems Technical Coordinator, Alex Chubb explained, “Our systems are primarily used in the building and construction industry but also have applications in mining and shipping segments.”
The team has been accessing the R&D tax support for four years and has undertaken R&D projects in areas ranging from experimental solutions through to product development and implementation.
“We have found that the R&D Tax Incentive is simple to access and it has helped us to keep pace with competition and market changes and to not only remain in business but to grow our business,” Mr Chubb said.
“In very recent times the support received through the R&D Tax Incentive has enabled us to begin investigating potential export markets” Mr Chubb said. Some of Smoke Control Systems’ innovations include the development of an Australian-made fire and smoke curtain, an insulated sliding glass door system and specialty smoke release vents.
Mr Chubb said “I don’t think that we would be where we are today without R&D tax assistance, it has encouraged us to invest and reinvest in R&D, supporting horizontal growth of the business into new and different markets.”
Regeneus – 29 August 2017
Regeneus has received $2.6m from its R&D tax incentive claim.
Regeneus is a Sydney-based clinical-stage regenerative medicine company using stem cell and immuno-oncology technologies to develop a portfolio of innovative cell-based therapies to address significant unmet medical needs in the human and animal health markets with a focus on osteoarthritis and other musculoskeletal disorders, oncology and dermatology.
ResAapp – 23 August
ResApp Health has received a R&D rebate of $516,305 from its R&D tax incentive claim for the financial year ending 30 June.
ResApp’s R&D focus has been on developing smartphone applications for the diagnosis and management of respiratory disease. The technology is based on machine learning algorithms that use cough sounds to diagnose and measure the severity of respiratory conditions without the need for additional hardware.
The algorithms were initially developed by The University of Queensland with funding from the Bill and Melinda Gates Foundation.
Bionomics receives $6.8m R&D tax refund
Bionomics has received a $6.8 million R&D tax incentive refund for the 2016/2017 financial year.
Bionomics (ASX: BNO) is a global, clinical stage biopharmaceutical company leveraging its proprietary platform technologies to discover and develop a deep pipeline of best in class, novel drug candidates targeting ion channels. Bionomics’ lead drug candidate BNC210, currently in Phase 2 for the treatment of generalized anxiety disorder and for post-traumatic stress disorder, is a novel, proprietary negative allosteric modulator of the alpha-7 (α7) nicotinic acetylcholine receptor. The Company is also developing BNC101, its lead humanised monoclonal antibody targeting a key receptor on cancer stem cells that is overexpressed in metastatic colorectal cancer, metastatic pancreatic cancer and many other solid tumours; BNC101 entered clinical trials in the first quarter of 2016. Bionomics has a strategic partnership with Merck & Co., Inc (known as MSD outside the United States and Canada).
The company is well funded as it progresses its phase 2 clinical trial in Post-Traumatic Stress Disorder towards a major value milestone and advances other pre-clinical assets in its development pipeline.
Immuron to Receive $2.16M R&D Tax Concession Refund
Immuron Limited (ASX:IMC) (NASDAQ:IMRN) is pleased to announce that under the Australian Government’s Research and Development Income Tax Concession incentive program, the Company will receive a cash refund of $2.16 million for eligible research and development expenditure incurred during the 2017 Financial Year.
This refund reflects the more than $4.6M investment the Company made in its research and development programs during the 2017 Financial Year to progress its pipeline programs including IMM-124E in NASH and ASH, IMM-529 in C. difficile, as well as the continuous development of the Company’s existing Travelan/Protectyn programs.
Immuron Limited is a clinical-stage biopharmaceutical company with a proprietary technology platform focused on the development and commercialization of a novel class of immunomodulator polyclonal antibodies that they believe can address significant unmet medical needs. Immunomodulator polyclonol antibodies are blood proteins that are produced by the immune system to attack foreign substances such as bacteria and can be specifically utilized to increase and/or decrease the activity of the immune system.
Released: Australia 2030 Plan
Innovation and Science Australia (ISA) has released its report to the government, Australia 2030: Prosperity through Innovation – a plan for Australia to thrive in the global innovation race.
Innovation and Science Australia is an independent board created as part of the NISA to help drive the innovation agenda forward.
Looking towards 2030, innovation will be integral to the expansion of Australia’s economy, keeping our workforce strong and addressing many of the societal challenges that the 21st century brings.
The ISA Board was tasked by the government to produce a strategic plan to advise policy makers on how to accelerate innovation, science and research and optimise Australia’s innovation system out to 2030.
The Plan makes 30 recommendations for governments to help achieve this goal and has identified five urgent imperatives for action across the innovation system in Australia. These imperatives include education, industry, government, research and development, and culture and ambition. Within these imperatives, the Plan describes specific opportunities where governments can exercise leadership and influence to accelerate the nation’s innovation performance out to the year 2030.
The Plan is a roadmap for national action and cultural change now to ensure Australia can achieve success and be included in the top-tier of innovation nations by 2030.
Aruma Resources a leading ASX gainer on discovery of gold anomalies
Aruma Resources (ASX: AAJ) is a focussed West Australian based gold exploration company which has several prospective project areas within the Eastern Goldfields region of Western Australia.
Aruma Resources Ltd has been one of the leading ASX gainers on news of the discovery of new large, high-grade gold anomalies at the Slate Dam Gold Project in Western Australia.
Shares were up as much as 67% to $0.035 after midday on strong volume of more than 25 million.
A geochemical program has identified multiple gold anomalies at the project, which is in the Eastern Goldfields.
The anomalies cover an area of 1.3 kilometres in strike length and 250 metres in width, with a peak value of 444ppb gold plus 10 further gold zones of greater than 10ppb.
This has extended the main gold system, which was recently discovered in Aruma’s maiden drilling program at Slate Dam.
It also provides immediate, high-priority drill targets for the next phase of drilling.
The geochemical program included 750 soil samples designed to infill and complete the soil/geochemical database for the project.
Aruma’s geochemical technique has been successful in defining trends that will allow for relatively fast and cost-effective drill target definition.
Aruma has also received an R&D Tax Incentive refund of $224,562 before costs, for the year ending 30 June 2017.
This represents 43.5% of allowable research carried out by Aruma on its Hydrothermal Mineralisation in Sediments theory, a targeting technique used at all of its projects.
The success of the R&D claims has seen the company receive more than $3 million in the last six years in incentives.
Recce Pharmaceuticals a leading ASX gainer after receiving additional R&D tax incentive rebate
Recce Pharmaceuticals Ltd (ASX:RCE) is a leading ASX gainer after receiving a further $861,590 R&D Tax Incentive Rebate from the Australian Government for its overseas Advanced Drug Development expenditure.
The additional payment for Recce’s synthetic antibiotic development program brings the total government rebate for the 2017 financial year to $1,288,516.
It supports the company’s important work to help address the global health issue of antibiotic resistance.
Recce is pioneering the development and commercialisation of a new class of synthetic antibiotics with broad spectrum activity designed to address the problem of antibiotic resistant superbugs.
Its patented lead candidate RECCE® 327 has been developed for the treatment of blood infections and sepsis derived from E. coli and S. aureus bacteria – including their superbug forms.
Pre-clinical testing in laboratories and animal models, in Australia and overseas has demonstrated positive results.
Recce has a manufacturing facility in Australia and is developing clinical research partners in the USA.
Regeneus Ltd – September 2018
Regeneus Ltd has received a $2.4 million in cash from the Australian Government’s research and development (R&D) tax incentive program for work it undertook during the 2017-18 financial year.
The clinical-stage regenerative medicine company reported its eligible R&D spending in the 2018 financial year was in line with what it spent in the 2016-17 period.
During the financial year, the company’s expenditure on eligible R&D activities was in line with the prior financial year. The R&D tax incentive is considered the most significant Federal Government program for promoting R&D and innovation in the biotechnology sector in Australia.
Regeneus will use the funds to progress its regenerative medicine product pipeline and expects that it will be eligible to receive further reimbursement for funds invested in its R&D programs during FY19.
The company’s cash runway is complemented by the recently announced extension of the $1.9m R&D loan facility with Paddington Street Finance Pty Ltd which is repayable on the earlier of the receipt of the next milestone payment under the Progenza manufacturing licence with AGC of Japan; the receipt of the FY19 R&D tax incentive; and 30 September 2019.