R&D Tax Funding Strategy for Your Business

Aug 02, 16 R&D Tax Funding Strategy for Your Business

When you are running a business, there are a number of things that you would consider, since money is of utmost importance. One such thing is to save the huge amount of taxes that you pay to the government. This is very true if your company is working on R & D activities. This is because, the cost incurred in running such business is very high – but the results are not guaranteed. Meaning – it would take time for your research to yield the desired results.

But now, relax, you can use the R&D tax funding strategy for your business and save the taxes that you pay to the government.

R&D Tax Funding Strategy for Your BusinessWhat is R & D tax funding?

As the name indicates, it is the fund that is given to projects that are working extensively only on research activities. If your project activities are research in nature, then you would be working on experiments and that would lead to observation, analysis and then an outcome. In such cases, the risk involved is very high. But at the same time, such research and developmental activities are essential for the growth of a strong economy. Hence the ATO, in joint venture with the AusIndustry (On behalf of Innovation Australia) has come up with the scheme called the R & D tax funding.

What is R & D tax funding strategy for your business?

Since your company and the project may have a lot of uncertainties and risks, there are a large number of companies that are ready to provide credit for these research activities. This is called the “tax credit finance”. While you are considering companies to finance for your research activities, it is important that you check the terms and conditions associated with the credit facility that is provided to your company.  It is also essential for you to check the charges levied, interest rate and the general terms that would meet the specific needs of the research activities that your company is undertaking.

Using this type of tax funding strategy for your business is very essential. When the Research and development activities receive such financial aid- in the form of R & D Tax credit (https://en.wikipedia.org/wiki/Research_and_Development_Tax_Credit) finance, it helps the company to:

o  Involve greater in research activities by not worrying about the capital raising options.

o  Invest more resource and time into research activities.

o  Develop products that are not commercial in nature by making use of the advanced technology.

o  These research activities would help the larger masses and hence the development of the country’s economy.

Eligibility Criteria:

Since there are companies that will be financing your research and development activities, it is important for you to understand the eligibility criteria for availing this finance.

•  First and foremost, your research and development activities should be registered with the AusIndustry (which runs on behalf of Innovation Australia). Registering your project activities is a legal requirement for availing the R & D Tax incentive and also the related finance.

•  Secondly, your company/business should be a regular payee of the CT (corporate taxes) with the government.

•  Thirdly, as the name suggests, the projects that you are undertaking should be purely research and development oriented. Meaning – it should be related to the development of science and technology and also helping the larger masses of the population.

Generally, companies looking for R&D Tax funding, finances only technology related research activities. However, if your company is developing any new machines, prototypes, software’s for the welfare of the larger masses and not commercial in nature, your company can still be eligible for this tax credit which is provided by the ATO – and hence could think of having a R&D Tax Funding Strategy.