The R&D Tax Incentive opened for applications to eligible companies on July 1, 2012 and the largest beneficiaries of the program are expected to be small and medium size businesses taking advantage of the 45% Refundable Tax Offset. Although the exact financial benefits across different sectors and companies are yet to be determined, we can look at the previous performance of the R&D Tax Concession program.
The available R&D Tax Concession statistics are quite impressive in terms of how many companies are claiming, as well as the size and distribution of the claims across industry groups.
- Total Claimants and Benefits: Close to 9,000 companies have been claiming the R&D Tax Concession with total benefits totalling around $1.4-1.5 billion a year.
- Largest Claimants: No surprise that even though mining companies make up just under 9% of the claimants, they derive close to the 30% of total benefits distributed.
- Professional, scientific, technical services and ITC makes up just above 30% of all claimants but only share under 18% of the total benefit.
- Manufacturing companies make up 40% of claimants but take up 29.3% of the total benefit.
- 20-80 Rule: Companies that claim above $10M of R&D Expenditure make up 3% of the total claimants but take up around 61% of the benefit.
- 80-20 Rule: Whereas companies with claims of under $500K make up over 57% of total claimants, but only share 6% of the total benefit.
- Victorian companies make up 24.7% of all claimants and take up almost 28.8% of the total benefit. This is the second largest benefit gained, falling behind resources rich WA.
- R&D Tax Offset: Between 43-48% of companies are registering for the R&D Tax Offset
- Third party providers: 85% of companies use the services of a third party provider and those who use a third party provider take up 95% of the total benefit received.
Engineering R&D projects
Working on new technologies? Civil, environmental, infrastructure projects?
The Federal government’s new R&D Tax Incentive may be beneficial to your business.
“The R&D Tax Incentive has more generous benefits… (it) effectively doubles the support
for small firms to 15 cents in the dollar and increases support for all other firms by a third, to 10 cents in the dollar”.
From July 1, 2011, the new program allows eligible businesses with a turnover of less than $20 million, to claim 45% of eligible R&D costs as a tax offset. For eligible businesses with a turnover greater than $20 million, a 40% non-refundable tax offset applies.
For those businesses with tax losses, this can mean a generous cash payment. And there is no ceiling as to how much can be claimed.
If you are working on the following type of engineering projects, there is a very good chance that your company may qualify for the R&D Tax Incentive:
- Conceptual design, testing, and modification of possible new product or process alternatives
- Design of tools, jigs, moulds, etc. involving new technology
- Design, construction, and testing of experimental prototypes and models
- Engineering activity required to advance the design of a product to the point that it meets specific functional and economic requirements and is ready to be constructed
- Experimenting with new material and integrating the material to improve products or processes
- Developing and/or improving new technologies
- Performing engineering studies to evaluate the development of new or improved specifications/modifications in terms of performance, reliability, quality and durability
- Searching for applications of new research findings or other knowledge
- Software applications development for external use
What costs can be claimed?
- Expenditure incurred on R&D activities including salaries and wages, overheads, contractors and consultants, lease of equipment, travel, testing and trials, etc.
- Decline in value of depreciating assets used in R&D activities;
- Balancing adjustments for depreciating assets used only in R&D activities; and
- Relevant parts of Cooperative Research Centre (CRC) contributions paid out of the entity’s own funds not out of Commonwealth funding.
As with any government program, strict eligibility and definitional requirements apply.
You may wish to consult a specialist in this area who can advise you further whether your business and activities are eligible for the R&D Tax Incentive. SUBMIT QUERY HERE
Or call 03 9555 3551 for further information.
R&D Tax Incentive Registrations are now open for the 2011/12 financial year.
