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Tips for startups in accessing their R&D Tax Incentive refunds

The 2014 financial year is now over. This means (amongst many other things) that startups can submit their applications for the R&D Tax incentives. Back in March, we caught up with PwC partner, Scott Warnock, on what the R&D tax incentive is and which startups can access it. In this article, we chat with Scott about how startups can maximise their R&D tax incentive refund.

As a refresher, what is the R&D Tax Incentive opportunity?

Scott: The R&D Tax Incentive is the Australian Government’s key program to support R&D and innovation. It provides companies with up to 45 cents back for every eligible dollar, even in many cases where start-up companies are not yet paying tax.  It’s not just scientists in white lab coats that are eligible!  In essence, any company developing new or improved products or processes could be eligible.

Why should I lodge my application so soon after year end?

Scott:  The benefits can provide much needed funding for startups.  Most startups are pre-revenue and therefore eligible for a cash refund up to 45 cents for every eligible dollar.  The sooner you lodge your application and the company income tax return, the sooner you receive the refund (and cash in the bank)!

What is the minimum amount I can claim?

Scott: The minimum expenditure to be eligible for an R&D Tax Incentive claim is $20,000. In our experience in working with a large number of startups, the base level of expenditure to ‘justify’ an R&D claim is approximately $50,000.

Do I need to lodge supporting documentation with my R&D Tax Incentive claim?

Scott: Supporting documentation does not need to be lodged with your R&D Tax Incentive claim. As part of the claim preparation process, we review sample supporting documentation to provide startups with the comfort that their claim is supportable.  Supporting documentation can take many forms – from emails between the development team to meeting minutes to discuss technical issues.

How long before I receive the refund from the ATO?

Scott: You generally receive the refund within 8 weeks of lodging the company income tax return. Don’t forget that we must first lodge your R&D application with AusIndustry, and AusIndustry typically take up to 10 business days to provide your registration number.

Where to from here? If you think your startup may be eligible, have a chat to your R&D specialist. Remember, the earlier you submit your application, the earlier your startup will receive their refund.

Emma Petroulas and Aaron Wallace are Co-Founders at Nudge Accounting. Scott Warnock is a Partner at PwC specialising in R&D Tax Incentives & Government Grants for startups.

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