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R&D Tax Breaks For Your Business
Did you know that you may be entitled to a tax refund on many normal operating expenses of your business each year?
You may not realise that many activities your business does every day can be classified as “research and development”.
Activities that can be eligible R&D and that you can receive a tax refund on include:
– meetings
– market research
– travel
– operating computers, equipment and machinery
plus much more.
There are two programs that you can claim under depending on when you undertook your activities:
1) 2011 Financial Year: R&D Tax Offset
2) 2012 Financial Year: R&D Tax Incentive
Both are similar in the order that claims are made:
1) Undertake eligible R&D activities and incur expenditure
2) After the end of the financial year, add up total expenditure claim
3) Register eligible R&D activities with AusIndustry within 10 months after year end
4) After receipt of Registration Number from AusIndustry, claim expenditure in Company Tax Return (in R&D Tax Schedule)
Making an “R&D tax claim” does not necessarily mean hours of additional paperwork and effort. Simply record your activities and your expenditure as you go and at the end of the financial year you will be ready to submit your claim.
Don’t be fooled into thinking that research and development is just for laboratories; in Australia the definition is industrial and commercial. This means it broadly applies to a very wide range of projects and company sizes. Your “invention”, “smart idea”, “product development” or “business improvements” could very well qualify.
There are several pages of eligibility criteria that need to be ticked off, but if you can say yes to the following, then it is definitely worth following this up:
- must be a registered Australian Company
- must be creating a new or improved product, device, material, process or service (or acquiring new knowledge)
- must be undertaking experimental activities ie designs, trials, testing
What is it worth to me?
A good question. For SMEs the benefit is pretty good in 2011 but gets even better in 2012:
2011: The after tax or cash benefit of the R&D Tax Offset is 37.5%. If you claim $20,000 as R&D this means a cheque back of $7,500. Or if you claim $200,000 as R&D this means a cheque back of $75,000. There is an upper limit of $750,000 on cash refunds.
2012: The after tax or cash benefit of the R&D Tax Incentive is now 45%. There is now no upper limit on cash refunds.
