Essential Tips for an Effective R&D Tax Funding Strategy

Estimated Time to Read: 3 minutes

Research and development are key to a stable economy of the country. Research and development are oriented towards better growth which thus leads to wealth creation as well. Companies/business working on such research activities is needed for any country. The government of Australia hence promotes and encourages such developmental activities – through a number of schemes which boosts research and development in the technological sector. One such scheme is the R&D tax credit incentive.

If your company is working on one such activity, here are some tips that you can utilize to run your research activities more efficiently.

Before I go ahead jotting down the tips, here are some jargons you ought to know!

a)  R&D Tax Credit: This is the credit facility that is provided by the government to companies that are working on research activities. This is a joint venture between the Australian government and the AusIndustry (working on behalf of Innovative Australia).

b)  R&D Tax Funding Strategy: To avail the R&D tax credit from the government you need to satisfy certain terms and conditions that are set from the authorities. So, before you claim for the credit, you will need money to effectively run your project. There are some companies that are ready to fund for your research activities. Availing such a fund and utilizing these for your research activities is called the R&D tax funding strategy.

Essential Tips for an Effective R&D Tax Funding Strategy

c)  R&D Tax Loan: The companies that are ready to fund for the R&D activities, do so by providing some amount of money in the form of loan. The loan that your company avails, has to be repaid once you are eligible and avail the R&D tax credit from the government. The R&D tax loan is given to your company with a specified rate of interest.

Now that you are familiar with the jargons, read on some essential tips to effectively utilize the R&D tax funding.

1.  Research Qualification: The first and the most important aspect of R&D tax credit, is to qualify for the same. Here are some general guidelines to make sure that your company is actually working and qualifying for the R&D tax credit from the government:

a.  Your company should be a regular payee of the CT (Corporate Taxes). However, remember that this scheme is applicable to SME (Small and Medium Enterprise), large companies and start-up ventures too.

b.  Your research activities should not already be known to the general public and it should not be easily deducible to equally competent technicians.

c.  The research should move from experiments, observations and analysis. The results of which should help the larger section of population.

2.  Research Funds: It is not important that your research activities should always show a positive result. The experiments might fail. But if your activities are research and developmental in nature you can still avail the credit facility. The R&D tax loans that you avail from companies, should be purely utilized only for research activities. It should not be utilized for other projects (if any) run by your company.

3.  Records: Keeping records of all your day to day transactions is very important. The AusIndustry would require that you submit all the related records for the previous five years. You need to keep record of your research activities, number of people involved, the problem statement and who your research is enabling in solving this problem, the competent individuals involved in this activity and the capital expenditure.

4.  Terms and Conditions: Not all company’ funding would suffice your specific research requirement. All R&D Tax funding strategies come with a set of terms and conditions. It is important to go through all the terms and conditions and understand the same before you go ahead and sign a contract with the funding company.