R&D SmartTax is proud to host Webinar 2 in its free 3-part series for small business accountants on Calculating R&D Expenditure and Deductions. This Webinar will take place on Tuesday 26 July 2011 at 11am EST.

In this detailed and practical webinar you will learn:

 - how to identify eligible R&D expenditure

 - how to categorise expenditure into ATO categories

 - how to calculate eligible R&D deductions

 - how to calculate the exact amount of R&D benefit your client will receive

 - how to maximise R&D tax claims, and

- what to do to minimise compliance risk

There will be plenty of practical examples to help you better understand the boundaries of what is and isn’t included in an R&D tax claim as well as tips on how to really maximise client R&D benefits. In addition, we will also cover how to generate new revenue for your accounting practice with R&D tax claims, creating a win-win situation for you and your client.

Please Click Here to Register Now For Webinar 2: Calculating R&D Expenditure and Deductions.

R&D SmartTax is proud to announce a brand new Template Package along with 4 new templates to help manage all aspects of compliance for R&D Tax Claims.

Our existing Template Package was one of our most popular products and included the R&D Plan and R&D Calculations templates for the R&D Tax Concession and R&D Tax Offset programs.

The 4 new templates we have added to these two favourites are as follows:

1. R&D Trial Record

2. R&D Learnings Report

3. R&D Labour Record

4. R&D Substantiation Checklist

The R&D Trial Record helps to document results and learnings from experimental activities using plant assets and is particularly important if you wish to claim expenditure for experiments. Both AusIndustry and the ATO have been known to focus on this area of compliance with the outcome being a disallowed claim if adequate records do not exist.

The R&D Learnings Report goes beyond the realm of R&D to actually form an important learning document to help your company manage, save and use the results from its projects for maximum benefit. It is particularly useful if there are staff changes and your company doesn’t particularly wish to “reinvent the wheel” the next time the project comes about.

The R&D Labour Record is a popular tool that is used to record employee time on R&D projects in a timely and contemporaneous manner. Most companies use this on a weekly, fortnightly or monthly basis. Again, this is critical for the ATO to verify labour costs where no timesheets are used.

Finally, the R&D Substantiation Checklist contains a list of all supporting records required to back up your R&D tax claim, to give you an easy, single point of reference for your compliance records.

For those familiar with our R&D Calculations Template, this has also been updated to include a new section to help calculate company overheads. Company overheads are sometimes overlooked when adding up your R&D tax claim, but they can actually be a way to easily maximise your claim.

Our R&D Templates are all tried and tested and we are confident that companies using them will greatly improve their records for R&D tax compliance.

Click HERE to Access the Template Package and make sure your R&D tax compliance is up to date.

The Federal Government has confirmed that the New R&D Tax Credit will officially commence on 1 July 2011, although the legislation has yet to pass parliament. This brings an end to much uncertainty for businesses who had been told that the rules for the New R&D Tax Credit would apply retrospectively to 1 July 2010. Now companies can proceed with their 2011 R&D Tax Claims with confidence, knowing that they can claim under the tried and true R&D Tax Concession and R&D Tax Offset programs.

The Government has also promised a sweetener for small to medium businesses with the introduction in 2014 of a quarterly payment system for the R&D Tax Credit instead of the usual lump sum cheque. This will help with the management of cashflow through the year.

With crossbencher support now available is is hoped that the Government doesn’t rush the legislation through without key changes to the complex and potentially unfair feedstock and dominant purpose provisions. With 1 July only weeks away, the more certainty that can be provided to companies wanting to step up investment into Australia’s lagging economy, the better.

For the full media release, please see below. And to get ready for your 2011 R&D Tax Claim, including a FREE eligibility analysis, please visit R&D SmartTax here.

 

Joint media release with the Treasurer, the Hon Wayne Swan MP.

Australian companies will become more innovative and globally competitive thanks to the new R&D tax incentive.

The Gillard Labor Government’s $1.8 billion R&D Tax Credit will deliver more funding to innovative firms – including manufacturers, ICT and biotech – increasing productivity and Australia’s national income.

This builds on Labor’s policy reform agenda of the past four years and will be a major benefit for businesses that innovate and use R&D as a platform for future growth.

Today we welcome crossbench Senators announcing their support which means the parliamentary road-block put in place by the Coalition will finally be removed.

The new and improved Credit will target more funds to genuine R&D deserving of public support – good news for industry and better value for taxpayers.

It will deliver a 45 per cent refundable tax credit to companies with an aggregated turnover of less than $20 million and a 40 per cent non-refundable offset to all others.

This will allow more firms to benefit from our massive boost to the innovation, science and research budget, helping them grasp the opportunities of our transition to a cleaner economy.

We welcome the commitment of industry, the Greens and independent parliamentarians who have put good policy ahead of political posturing in supporting this reform. 

The development is the culmination of an extensive consultation and negotiation process.

Following discussions with the Greens, the Government will introduce quarterly payments for small and medium businesses from 1 January 2014. These firms will get their credit sooner, significantly improving their cash flow and incentive to invest in R&D.

The deferral of the start date to 1 July 2011 has an overall impact of $40 million, with a negative impact of $310 million in 2011-12 and a positive impact in 2012-13 of $270 million.

The Government will continue to work in partnership with the business community to get the most from this landmark reform. An advisory group will be established through the Innovation Australia Board to monitor the implementation and operation of the Credit. The Government, through AusIndustry, will run an extensive education program to ensure firms are kept up to date.

A printable version of the media release [PDF 97KB] is available.

R&D SmartTax is proud to advise it is hosting a new Webinar Series starting on Tuesday 21 June 2011 at 11am EST. The first topic is a Practical HowTo on R&D Tax Basics for Accountants for 2011 which is timely with the forthcoming commencement of the 2011 R&D tax claim season after 1 July.

Caroline Hughes, Managing Director of Hughes Group Services Pty Ltd and creator of R&D SmartTax will be presenting each Webinar, aimed at providing as much practical information and tips possible on how accountants can maximise R&D tax claims for clients whilst minimising the compliance risk.

Webinar 2 is on the details of R&D Expenditure Calculations and will be held in July on a date to be confirmed whilst Webinar 3 will be all about the much anticipated New R&D Tax Credit and will be held in August.

Although the end of the financial year is a busy time for all accountants it is hoped that the extra knowledge gained from the Webinars will help prepare accountants for client queries regarding R&D tax claims. Further, Caroline also aims to clarify how R&D tax claims can help provide additional revenue for both accountants and their clients in 2011, creating a nice win-win outcome in a usually compliance driven area of income tax.

All 3 Webinars are free to attend.  To register for Webinar 1: R&D Tax Basics for 2011, please click on the link below. We look forward to seeing you then!

https://www1.gotomeeting.com/register/188596017

Whether trusts can make R&D tax claims has to be one of the most common issues I encounter each week.  It is a common issue because accountants love to automatically set up trust structures for their clients as a way of protecting assets, and as a general rule, trusts are not allowed to make R&D tax claims.

However, before we simply dismiss all trust entities as being ineligible for R&D tax claims, it is worth knowing that there are some circumstances where trust entities can make R&D tax claims. Here’s a discussion on how.

1) Public Trading Trusts can make R&D Tax Claims

This rule is easy and explicit in the tax legislation. However, it is unlikely to be the structure of a small business entity.

2) Trustee Companies Can Make R&D Tax Claims

If a trustee company conducts R&D activities on its own behalf and not on behalf of a trust, it will be eligible to make R&D tax claims.  This requires a number of tests to be satisfied. The starting point is that the trustee company must be lodging its own Company Tax Return and holds its own ACN/TFN and is registered for GST.  Next it is a requirement to show that the beneficiary of the R&D activities is the trustee company and not the trust.  Intellectual Property should be owned by the trustee company. The trustee company should have its own bank account and company records. Ideally it should be the only trading entity with the trust being dormant, but it is also possible for the trustee company to be set up as an R&D company only.

AusIndustry and the ATO have released a Fact Sheet that explains the requirements in more detail.

Whether your trust structure will be eligible will depend on the facts of your situation. With the queries I receive approximately 50% find they are eligible, and the rest, unfortunately not. But of those that aren’t eligible, with the valuable information that structure is the only thing holding back their eligibility, they often act quickly with their accountant to make changes to be better set up for next year.

Here’s some tips if this is the situation you find yourself in:

1. If possible, set up a a new separate company to conduct R&D, thus avoiding all trust issues altogether

2. Before going down the path of making changes for your existing trustee company for the past financial year, ensure that the cost of these changes doesn’t outweigh any potential R&D benefit you will receive

3. Seek advice! Contact us or your local R&D consultant to get clarity, or if you require additional confirmation, head straight to the top and contact the ATO via the business info line.

R&D SmartTax is happy to help businesses or their accountants to better understand the R&D eligibility rules and how they apply to you. Feel free to contact us for any of your R&D tax queries and we will make sure you make the most of your smart ideas.

Government money is one of the best funding sources for a company seeking to put itself beyond the norm in the name of technology advancement. Generally in Australia there are two main types of government funds available being 1) Government Grants and 2) R&D Tax Breaks. There can be a lot of appeal in trying to access Government Grants due to the funding amount being often up to 50% of a project’s value. This represents money that you don’t otherwise have to come up with and can certainly lessen the financial burden of an investment into new technology.  However, grants do have their downsides too, and if I had to pick a government funding program for my business, I know which one I would choose – R&D Tax Breaks. Here’s why.

1. R&D Tax Money is Guaranteed and Grants are Pot Luck

If you are in the technology development space, it is assumed that you have eligibility for the R&D Tax Offset program.  Submit two forms at tax time and your R&D Tax Money is guaranteed. On the other hand you could spend months preparing a grant application for grant funding only to be knocked back by the assessors at the end of it all. In fact Commercialisation Australia’s programs are currently putting through less than 15% of all applications. That is a pretty poor success rate and could mean that a lot of your time and money have been wasted for no funding result.

2) R&D Tax Money is Tax Free while Grant Money is Taxed

When your R&D Tax Cheque arrives in the mail your company can bank it as is and then spend it on whatever you like. On the other hand your Grant money is classed as Assessable Income in your Company Tax Return which can bite at tax time possibly leading to a bigger tax bill than anticipated.  I genuinely have clients that have faced this problem. With the R&D Tax Offset benefit being 37.5% potentially rising to 45% in 2012, and the after tax benefit of a 50% Grant being as low as 35%, I know which money I would rather have.

3) R&D Tax Money is Spent As You Like; Grant Money is Spent As Per the Grant Agreement Terms

You may not realise that R&D Tax Money is provided by the Government on a purely market driven basis. This means that you and your company are in full control of your projects and the directions they head in, and as long as you still meet the definition of R&D, you can still claim each year. On the other hand, if you have somehow lined up your resources to commence your project when the Government Grant money comes in, you must follow the terms of your Grant Agreement for the way your project progresses which can make it difficult to adjust to changing market forces and project needs.

Now these are three great reasons as to why I would choose R&D Tax Money over Grant Money. However if you still decide that Grants are for you, let me share one last piece of advice with you; you can do BOTH. Yes, it is possible to get a Government Grant and also claim the R&D Tax Offset for the same project. This is because of a tax provision called Clawback. Basically there is a formula that you apply when submitting your R&D Tax Claim to take into account any grants that you have received. And what it does is reduce the amount of your R&D Tax Offset benefit from 37.5% to 30%. But you can still receive that 30% as cash which is a nice little kicker to your project and company.

If you would like to  investigate Government Grants further, I can suggest a fairly comprehensive website called Grantslink www.grantslink.gov.au.  And if you would like to check out R&D Tax Breaks and specifically the cash-friendly R&D Tax Offset program out further, I can definitely suggest you go here: www.smarttax.com.au. Good luck!

An R&D Tax Claim is no different to any other type of tax in Australia – everything must still follow the rules for substantiation and compliance. There are two government bodies that look after compliance for R&D Tax Claims in Australia. AusIndustry administers the rules associated with the eligibility of R&D activities, and the ATO administers the rules associated with the eligibility of R&D expenditure. Your company may be contacted at some point after you lodge your R&D claim by either AusIndustry or the ATO to discuss your compliance and it is worth knowing that due to the self assessment tax regime in Australia, your R&D claim is not actually considered to be eligible until given the all-clear by these bodies. 

Fortunately there is a lot of guidance available to help you with your R&D tax compliance. Our four tips below cover the key areas you need to know about:

1. Be technical, detailed and descriptive in your R&D claim documents.

AusIndustry’s first step in its new review regime is to look at your R&D Application for any areas that require further attention. If your project Technical Objective is technical, detailed and descriptive this will reduce the chance of progressing further in the review. Similarly, your R&D Plan should also get to the heart of why your project is new or different to that in the public arena, and what activities you are doing to overcome the technical issues.

2. Document and record all R&D activities and R&D expenditure

If you have undertaken research, file your research findings. If you have undertaken trials, record and detail each trial result. Record assets used in R&D activities including why and for how long. Expenditure requires source documents such as invoices. If possible use employee timesheets, but if not, either use logbooks, diaries or create your own weekly time record for relevant staff involved in R&D activities.

3. Keep a Folder

One of the easiest things you can do is to create an R&D folder to store all your information.  Not all information needs to be especially created for your R&D Tax Claim. You can easily use documents created by day to day procedures that your company already has in place.  This especially works for your R&D Plan which can use meeting minutes, Gantt charts, design drawings, risk assessments, memos, emails or any other similar type of document that you use to share information.

4.  Get assistance

An experienced R&D tax consultant will be able to review your claim or assist you with any compliance help you require. A little work upfront could save a lot of hassle down the track. R&D SmartTax has partnered with one of Australia’s best known R&D tax firms, Michael Johnson Associates to help our customers with any additional R&D tax compliance assistance. Click Here to find out more about how they can help you.

To conclude, R&D tax compliance can be quite simple and most companies find no problem with it.  R&D SmartTax has worked with both AusIndustry and the ATO over the past decade and has used this experience to create all of its tools including the popular Templates that will help you correctly record your R&D information. If you ever have any questions or queries about R&D Tax Compliance feel free to contact us at info@smarttax.com.au.

Labour’s controversial new R&D Tax Credit bill looked like it was set for the green light after receiving support from all independents in the House of Representatives last week to go through to the Senate.  However support from the Senate was not so forthcoming with two Senators seeking amendments to the bill leaving Labour high and dry and with no new R&D tax legislation being passed before Christmas.

Senator Kim Carr, Minister for Innovation, Industry, Science and Research was scathing of the Coalition’s opposition to the bill, stating that ” The Coalition’s deliberate filibustering in the Senate has once again deprived thousands of businesses of vital funds to help turn good ideas into commercial reality.”

Many business groups, however, are cheering at the news that the bill failed to get through, particularly as amendments sought in the Senate include the requirement that the new R&D Tax Credit not commence until 1 July 2011 and also that the Federal Government removes the dominant purpose test. The dominant purpose test means supporting activities are only allowed to be claimed if the dominant purpose is to support research and development activities. Under this test supporting activities that had any commercial purpose to them would be ineligible.

Whether these amendments get through will require more patience from Australia’s innovation community as it now waits until parliament’s next sitting early in 2011. As the new R&D Tax Credit controversey continues to drag out and the end of the financial year draws near, it is becoming more of a safer bet that the start date will be 1 July 2011 rather than the retrospective application to 1 July 2010.

Our recommendation is business as usual for the current R&D Tax Concession and R&D Tax Offset programs.

To take advantage of the current status and claim your rightful tax refund, use R&D SmartTax’s R&D Eligibility Wizard and R&D Application Wizard. Both tools eliminate months of work in the R&D tax claim process. The R&D Eligibility Wizard helps companies to easily self-assess their eligibility and the R&D Application Wizard is a one-step tool that also completes the official application form for easy lodgement at tax time. Both tools have been created for the current R&D Tax Concession and R&D Tax Offset programs with the new R&D Tax Credit to be covered once enacted.

To read the full Press Release by Senator Carr, click on the link below:

http://minister.innovation.gov.au/Carr/Pages/COALITIONDEPRIVESBUSINESSOFRDASSISTANCE.aspx

Australian taxpayers are still in limbo over the Federal Government’s proposed R&D Tax Credit with the bill now looking like it is unlikely to be passed until late January/early February next year. 

This means Australia’s innovation community is no closer to knowing if the start date will be retrospectively applied to 1 July 2010 and also what form the controversial bill will finally take. 

The proposed feedstock and “dominant purpose” tests have been hotly debated by industry with many analysts predicting their introduction will lead to a significant decline in reported Business Expenditure on Research and Development similar to the drop seen after changes in 1996.

 Senior parliamentary members are echoing calls by businesses to view economic modelling on the proposed changes. So far the Federal Government has not produced any modelling on the new R&D Tax Credit leading to further concern about its future effect on Australian innovation. 

Businesses used to experiencing inconsistent interpretation of the current well-known R&D rules by Innovation Australia’s AusIndustry review teams are also nervous about how the proposed rules will be interpreted going forward.  One comment leaked by an insider suggested there was an intention to push the legislation through in its current format and then run a series of ATO test cases to let the courts interpret the new rules.  Such comments are only fuelling the concerns companies are having about the new R&D Tax Credit and whether the Australian Federal Government is serious about supporting business innovation here.  In wake of all this uncertainty, how 2010 shapes up for Australian innovation remains to be seen.

Our recommendation is to take advantage of this limbo by bringing forward innovation spending to the current 2011 financial year where possible. Current R&D rules are well known bringing an extra amount of certainty to R&D tax claims made in the 2010 and 2011 financial year. 

To take advantage of the current status and claim your rightful tax refund, use R&D SmartTax’s R&D Eligibility Wizard and R&D Application Wizard. Both tools eliminate months of work in the R&D tax claim process. The R&D Eligibility Wizard helps companies to easily self-assess their eligibility and the R&D Application Wizard is a one-step tool that also completes the official application form for easy lodgement at tax time. Both tools have been created for the current R&D Tax Concession and R&D Tax Offset programs with the new R&D Tax Credit to be covered once enacted.

(This article by Caroline Hughes from R&D SmartTax recently appeared in the TranZition Report published by biotechnology and emerging technology recruitment specialists TranZition www.tranzition.com.au)

We are often asked where the starting point is for a new business idea, and my answer is always the same – the Australian Institute of Commercialisation (AIC). This is a government initiative that makes the ideal first place to go to when you have first conceived your great new idea but are not sure what to do next.  The AIC is about to start its Queensland round of workshops – I would highly recommend going along to one if you can. Please see below for more information and all the best with your innovation!