The 2013-14 financial year is quickly coming to an end and in this edition of Saving Highlights we dive into the main government Grant Incentive and Concession programs available to businesses that require immediate action. We also outline some of the proposed government programs announced in the May Budget.
Actionable Items Prior to June 30, 2014:
Claiming the Research & Development Tax Incentive
Applications for the FY 2013-14 R&D tax incentive claims will open shortly and there are a number of matters that need to be considered for those businesses wanting to access either the 45% refundable tax offset, or the 40% non-refundable tax offset.
Entities that have dealings with related parties and are seeking to claim the research and R&D tax offset must be aware of specific rules which may affect their claim.
For example, if the expenditure is incurred to the entity’s director or significant shareholder (or someone affiliated with them), and that amount is paid in the same year, an R&D notional deduction is available for the amount paid (provided all other eligibility requirements for the R&D tax incentive are met). Any amounts unpaid to the director or shareholder may be claimed as a notional R&D deduction in a later year when the payment is made.
‘Paid’ has its general legal meaning, which includes constructive payment. Physical payment is not always necessary for payment to occur – however, simply using a journal entry to transfer an obligation will not, on its own, constitute payment.
If expenditure is incurred in a non-arm’s length transaction, or to an associate, the value of the transaction is taken to be the market value, regardless of whether the amount incurred was actually more.
Finally, if the R&D entity is incurring expenditure on goods or services provided by an entity it is connected or affiliated with, the R&D notional deduction is reduced to the actual cost and any marked-up value is ignored. However, the amount of the mark-up may be deductible under ordinary deduction provisions.
We can assist you in determining whether the relevant entities are deemed as associates of each other, and the most effective way of claiming the eligible R&D expenses.
Overseas and Advanced Findings
An application for an advance finding is optional but can provide companies with certainty that planned activities are eligible for the R&D Tax Incentive. However, where activities are or will be conducted overseas, both an advance finding and a finding on overseas activities must be sought.
An advance finding can be sought in relation to:
You must submit an advance finding before the end of the income year in which the activity was conducted. If the activity was conducted in the last income year, you should proceed to register the activities you have assessed to be eligible.
What is a Finding about Overseas R&D Activities?
In certain situations, some of the R&D activities cannot be performed in Australia. To claim a tax offset under the R&D Tax Incentive relating to R&D activities performed overseas, you must have successfully obtained an overseas finding and an advance finding from Innovation Australia. This application allows you to seek both these findings.
The application requires detailed information to be provided about the R&D activities in Australia that are related to the overseas activities. We can assist you with the application process and assess whether the Advanced and Overseas Findings are suitable to your particular situation.
R&D Tax Incentive
As part of the 2014-15 Federal Budget, the Australian Government has reduced the rate of benefit to all companies under the R&D Tax Incentive, effective from 1 July 2014. The rates of the refundable and non-refundable offsets will be reduced by 1.5 percentage points to 43.5 per cent and 38.5 per cent respectively.
The change will apply for a company’s income years commencing on or after 1 July 2014. According to AusIndustry, no companies will be excluded from accessing benefits to which they are currently entitled and the existing delivery arrangements and eligibility requirements will also not be affected.
Export Market Development Grants
Also, as part of the recent announcements, the Federal Government made the following positive changes to the EMDG program:
This means that businesses that previously did not meet the previous threshold of $20,000 of eligible overseas marketing expenses, can now apply.
First time applicants can submit application covering this and previous financial year as one claim.
Applications for the 2013-14 grant year, not lodged through EMDG Consultants approved under the EMDG Consultant Quality Incentive Program, must be lodged from 1 July 2014 to mid-night (Australian Eastern Standard Time) Monday 1 December 2014.
Applications through EMDG Consultants approved under the EMDG Consultant Quality Incentive Program can be lodged from 1 July 2014 to mid-night (Australian Eastern Standard Time) 3 March 2015.
Proposed New Programs
Overall, there has been a reduction and/or consolidation of existing programs such as Commercialisation Australia, Enterprise Connect and TCF scheme. These have been rolled into a new Entrepreneurs’ Infrastructure Programme worth over $484 million.
Some of the other new programs that have been announced for various industries include:
Rural research and development (+$100 million)
Emissions Reduction Fund (+$2.55 billion)
National Landcare Programme (+$1 billion)
General Practice Rural Incentives Programme (+$35.4 million)
Medical Research Future Fund-Investments (+$276.2 million)
Entrepreneurs’ Infrastructure Programme (+$484.2 million)
Growth Fund (Car manufacturing transition) (+$100.6 million)
Industry Skills Funds (+$476 million)
Manufacturing Transition Grants Programme (+$50 million)
We are eagerly awaiting further information from the government on each of these programs and will communicate any further announcements to the programs as they come up.
If you wish to discuss your client’s eligibility for any of the above programs or need assistance with submissions, please contact Saving Point on 03 9555 3551 or [email protected]