How to Go About Financing Your R&D Tax Incentive?

Oct 03, 16 How to Go About Financing Your R&D Tax Incentive?

Companies in Australia which are working on R&D activities find it difficult to run their business mainly because of constraints in cash flows. To overcome such constraints, the government of Australia has permitted a scheme called the R&D tax funding/financing. This means that you can contact agencies/companies that are ready to fund your capital expenditure.  With this facility you can think about financially expanding your company without having to concentrate on the cash flows of your business. Read on to find out all you need to know about your R&D tax incentive finance.

how-to-go-about-financing-your-rd-tax-incentiveBefore that, you should be familiar with a few other related terms.

What is R&D Tax Incentive?

As the name indicates, it is a credit that you can avail from the government, mainly if you are working on R&D activities. This is to encourage companies which are working in the research areas. This scheme was introduced because the companies working in the research sectors undergo a huge risk, not only in terms of capital expenditure but also in terms of delivering the quality results to the end customers.

This incentive can be availed if:

o  Your project is purely technological or scientific in nature.

o  Your project/company is registered with the AusIndustry (which runs on behalf of Innovation Australia).

o  You are a regular corporate tax payer to the government.

How and when to you claim for the R&D Tax Credit?

You need to claim for the R&D tax credit ( along with the corporate taxes that you pay to the government annually. During this time of tax filing you need to mention the following, so that you are eligible for the R&D tax credit:

o  Technical details regarding the research activities – the current problem that your research is addressing and the time line at which your research activities could yield positive results.

o  The persons involved in the project and the tasks assigned to each.

o  The total revenue and cash expenditure incurred by the R & D activities.

o  The day to day cash transactions.

If your company finds it difficult to claim the R & D tax funding or the R & D tax credit from the government, there are agencies and companies who can assist you with the same. The areas in which you can get assistance are:

  Identification of the R & D eligible activities

  Preparation of the technical write-up

  Assembling of the total tax expenditure and the filing the R&D tax application

  Providing the claim summary letter

  Related advice regarding the same

What is R & D tax financing?

There are some financial institutions which are ready to fund for your research activities. This type of funding happens even before you avail the R&D tax credit from the government. They work with a set of terms and conditions and lend you money with some rate of interest. This money can be repaid to the financial institutions after you avail the R&D credit from the government.

What is the use of R&D Tax Financing?

With the help of such funding, you can:

o  Run your business without having to think about the huge expenses and cash flows which you encounter.

o  You can have more resources work on the specified research activities.

o  Provide clarity with respect to the time line and delivery of your research activities.

o  Do not have to think about capital fund raising from any other sectors.