To be successful in business, you need to constantly innovate to stay ahead of the curve. You may even undertake some Research and Development (R&D) to keep your competitive edge.
If your company develops new products, processes or innovative ideas, you may be eligible for the Federal Government's Research and Development Cash Back Incentive or an additional reduction in your income tax.
Your potential benefit will depend upon your tax position.
If you are in a tax loss position and you ARE eligible for the concession, than this may mean a cash rebate of $45,000 for every $100,000 spent on R&D. This is a huge benefit for start-ups and can help generate cashflow in the early years.
If you are in a taxable position, then you may receive an additional reduction of tax of up to $10,000 from your tax bill for every $100,000 spent.
R&D can relate to any industry and must be related to creating a new or improved product, device, material process or service or acquiring new knowledge to enhance your business. The outcome must be uncertain, so you if you had to do any trials, tests or experiments to achieve your goal then you may be eligible.
Even if it didn’t work, you may still be eligible!
There are some exclusions such as management studies, reverse engineering, market research, social sciences, arts and humanities and there are special rules around computer software and overseas R&D.
The expenses that can be claimed for research and development include subcontractors, consumables, materials, labour and even a percentage of your overheads. It’s amazing how much your internal labour and overheads can add to your R&D spend.
An R&D application for the 2014 financial year needs to be lodged with AusIndustry before April 30, 2015 and before you lodge your income tax return.
