Hi AlphaAngle

Herewith an overview from a Tax consultancy perspective. I have heard examples where Companies claim they get 54 c in the Dollar for R & D Expenditure in support of products and/ or services which are exported. Suspect this may arise if a Company receives the Tax incentive, qualifies for Export Developments grants and in some cases may even account for Loans granted by Government in support of R & D expenditure ( tailored to reduce or at least share in the the Company Risk ahead of initiating the R & D Program ). 

I simply use a number of 43.5% Rebate as a standard in any analysis, a number I got from a Govt website some time back. Accept that thresholds likely to create an error though. Very few Companies spell it out and whilst you can use the the Rebate / Grant payout to calculate, the expenditure is often muddied by the number and cost of employees involved in the R & D activity.

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Updated rates of return under the R&D Tax Incentive

Listed below demonstrates the reductions in company tax rates and in some case an increase in the actual rate of return under the R&D Tax Incentive for the FY 20/21 and FY 21/22 claim years:

FY 2020–21

·        Annual revenue <$20m – Company Tax Rate: 26% – Refundable Tax Benefit: 43.5% (if matched by tax losses) or 17.5% (when trading in profit)

·        Annual revenue $20m-$50m – Company Tax Rate: 26% – Non-Refundable Tax Offset: 12.5%

·        Annual revenue >$50m – Company Tax Rate: 30% – Non-Refundable Tax Offset: 8.5%

FY 2021-22

·        Annual revenue <$20m – Company Tax Rate: 25% – Refundable Tax Benefit: 43.5% (if matched by tax losses) or 18.5% (when trading in profit)

·        Annual revenue $20m-$50m – Company Tax Rate: 25% – Refundable Tax Benefit/2 tier benefit: 8.5% on eligible R&D expenditure which accounts for up to 2% of total company expenses and an additional 16.5% on eligible R&D expenditure exceeding the 2% baseline.

·        Annual revenue >$50m – Company Tax Rate: 30% – Refundable Tax Benefit/2 tier benefit: 8.5% on eligible R&D expenditure up to 2% of total company expenses and an additional 16.5% on eligible R&D expenditure exceeding the 2% baseline.

If you require assistance to prepare your 2021 R&D registration application, please call us now so we can lodge as early as the 1st week of July.

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The Export Marketing Development Grant – EMDG update

Under the proposed new EMDG scheme, eligible SMEs will be required to register a “plan to export” with an export marketing budget by the 30th November 2021 to enable entry into a pre-approved grant funding agreement which is designed to provide greater certainty of funding for claimants prior to undertaking any of their agreed export marketing or promotion activities.

Grants will target eligible export-ready SMEs with an annual turnover of less than $20 million at three stages of their export journey:

·        Eligible SMEs who are new to export – grants up to $80,000 over two years.

·        Eligible exporters who plan to expand their presence in export markets – grants up to $240,000 over three years.

·        Eligible exporters who continue to expand into new markets – grants up to $450,000 over three years

EMDG entitlements received in the past will be counted in a company’s grant history, so exporters who have received the maximum eight grants will not be eligible for the proposed new EMDG.

As the legislation still needs to pass when parliament resumes in August is the reason why the expected registration date has been pushed back from the 30th June to the 30th November.

A framework, which hopefully helps.

Regards

Rob W

Hi AlphaAngle,

I'm not an expert by any means but my impression was if a company meets certain conditions they can apply for R&D tax rebates or government grants. Below is some information I've found that explains it pretty well.

According to Australian Gov

Companies with an aggregated turnover of <$20M may receive a refundable R&D offset rate equal to their corporate tax rate + an 18.5% premium

Companies with an aggregated turnover of $20M or more - R&D up to 2% of expenditures = company tax rate + 8.5% premium, additional R&D company tax rate + 16.5% premium

Do you Know the Difference Between Govt Grants vs the RD Tax Incentive?

“There are roughly 700 business grants offered by the three tiers of government in Australia. Do you know which ones apply to you?”

“This is a scheme overseen by AusIndustry in conjunction with the ATO and, for every dollar spent on eligible research and development activities, companies receive a 40c or 45c tax offset.

If you record a loss and your turnover is less than $20 million, that offset is available in cash.”

First, for ongoing research and development, use the R&D Tax Incentive. Don’t throw away your own money by failing to register and claim.

Second, be open to grant opportunities, particularly the AC grants. We point clients to the Grant Finder website where you can search a range of categories. Part of the skill is getting quickly to a point where you know that it’s not for you.”

https://mjassociates.com.au/journalpost/do-you-know-the-difference-govt-grants-vs-the-rd-tax-incentive/

How the RDTI Has Helped Other Companies

“Being a start-up, [the RDTI] has been critical for our company because, while we are listed, because we are not out in the market and selling a product yet, it is very difficult to get funding.” – Georgina Carpendale CFO MX1

Since the inception of Micro-X in 2012, the organisation has applied for the RDTI, which forms about 20% of their total funding. Research and development takes up 90% of Micro-X’s budget.

Needing such a high level of investment, the RDTI has enabled the company not to need to always be reliant on external investment.

“We’ve probably grown quicker than we planned, without the money coming through [from the RDTI] we wouldn’t have been up to the 23 employees,” she says.”

“In regards to equipment, the RDTI has assisted Micro X in purchasing equipment to develop and manufacture novel and innovative carbon nano-tube technology products.”

“Especially for the Australian economy there are companies here that have ground-breaking technology and without the R&D Tax Incentive it would have been very, very difficult to bring it to market and [the question of] whether we would even be able to do it in Australia or not.” – Georgina Carpendale CFO MX1

https://business.gov.au/grants-and-programs/research-and-development-tax-incentive/how-the-rdti-has-helped-other-companies/microx-limited

Other links

https://business.gov.au/grants-and-programs/research-and-development-tax-incentive

The R&D Tax Incentive Insights Podcasts

https://business.gov.au/grants-and-programs/research-and-development-tax-incentive/the-rd-tax-incentive-insights-podcasts

Case study of Micro-X (ASX:Mx1)

https://business.gov.au/grants-and-programs/research-and-development-tax-incentive/how-the-rdti-has-helped-other-companies/microx-limited

Info on government grants for innovation:

https://www.business.qld.gov.au/running-business/growing-business/becoming-innovative/innovation-grants-support/grants

If you Google "RDTI At a Glance PDF" there's a 2 page document giving you a general overview.

Thanks for the topic, it's added a new podcast to my rotation.

Great information, really appriciate it. Does anyone know if there is any way to predict timing of the rebate (like usually falling in the quarters following FY year end) or this is paid on a when claimed basis?

AlphaAngle

As there is a tax offset, suspect would generally be claimed to co-incide with the Tax year ie when a tax obligation is calculated. For the Companies I hold, normally claimed 30 June (so annually), with the payout- cash inflow in the first quarter of the new financial year.

Take Pointerra for example. Expect the Rebates/ Grants will feature in the soon to be released FY 2021 Financials. Receipts likely to show in the next 4c (end October).

Rob W