Statistics show that 70% of eligible Australian businesses aren’t receiving the Australian Government’s Research and Development Tax Incentive. There is a chance that your workplace may be carrying out research and development (R&D) activities without even knowing.
The Incentive helps support new knowledge generation by providing a generous tax offset to Australian businesses developing innovative products and new ways of doing things for the benefit of Australia. Keep reading to discover seven R&D activities you might have overlooked.
Does your business/workplace:
1. Design and develop products from start to finish?
Existing solutions, often referred to as ‘off-the-shelf’ products, are usually the cheapest and quickest answer to a problem: you don’t need to reinvent the wheel and you’ll avoid spending time and money on development. But, if your business has looked into using or customising existing products, services, devices, processes or materials without success, then chances are your next move is to design from scratch. If this is the case, you may be eligible for the Incentive.
2. Outsource research activities?
Does your business use a specialised firm to carry out research? If the outcome of your research activities can’t be determined in advance – but can only be substantiated by carrying out an experimental progression of work – then it may well be eligible for the offset.
Research is a highly dedicated field, and even the biggest companies outsource enquiry to external providers to hunt for new knowledge. For example, we work with telecommunications companies that use specialised external agencies to conduct scientific research into their products.
3. Have lots of expenses, but little sales?
A common trend for businesses undertaking R&D activities is a high expenditure to sales ratio. Claiming the R&D Tax Incentive has generous benefits available for companies that are investing in this way for the long-term.
This kind of ratio is expected in the early days of a start-up – where investing money both upfront and during the development phase is anticipated. But, if you run an established business that’s still operating at a loss, it’s because you need help managing your financials, or you’re investing in R&D for a long-term benefit.
4. Try to solve a common industry problem?
Commonly, a business launches because the owner(s) thinks they can offer something new or improved to the market. But, this isn’t as easy as it sounds. Instead, entrepreneurs may try solve an industry problem, which can make them eligible for the R&D Tax Incentive.
In the software industry for example, companies are having an increasingly difficult time with designing and developing new complex algorithms to interrogate its big data in order to form a specific module of a client service offering. These new complex algorithms are better than the industry standard. By doing so, companies like these are attempting to solve a common industry issue in a unique manner with superior capabilities, i.e. handling big data analytics, and may be eligible for the offset.
5. Have job titles like Innovation Manager, R&D Engineer, and Research Scientist?
It may sound obvious, but if your business employs people with job titles such as “Innovation Manager” or “Product Developer” then you’re on your way to being entitled to the Tax Incentive.
These roles are often focused on researching, designing, or developing something new or improved, and, as long as you can prove it, your company may be eligible for The Inventive.
Tip: When preparing your application, it’s important to include position descriptions of the employees conducting R&D to substantiate your claim. Ask us for help.
6. Undertake trials that lead to large amounts of dumped goods?
Does your company have excessive ‘wastage and dumped goods’ costs on its profit and loss statement?
Sometimes, you can’t know the result without undertaking trials and testing. We see this a lot in the fast moving consumer goods industry. For instance, if a health food company is looking to engineer a new type of soy milk that’s markedly different from those available, it’s going to go through extensive testing. While the milk might be suitable in lab trials, there could be issues during large-scale testing and production, resulting in thousands of litres of stock being flushed down the drain. If your company has substantial costs attributed to dumped products until it successfully designs a product, it could be a sign you’re conducting eligible R&D activity.
7. Licence new technology and trial its use?
Is your company pursuing the use of innovative technologies? If your company is acquiring or licensing technologies to build a better process off the back of it, it could be an indication it’s undertaking R&D.
For instance, some companies are working with IBM’s Watson – a cognitive system enabling partnership between people and computers – to address a problem. Using Watson’s intelligence and forecasting capability, one of our clients is trying to improve traffic flow and reduce car congestion.