R&D Tax Incentive Can Help Boost Innovation

Sep 01, 16 R&D Tax Incentive Can Help Boost Innovation

Experts suggest that, the more time you spend in researching a subject, the more information you tend to gain. This suggests that research and innovation go hand in hand. This helps in the growth of the country’s economy which in turn helps in wealth creation. Hence, the government of Australia has schemes that helps and boosts the innovation amongst companies. One such scheme is the R&D tax incentive. This is an initiative started by the Australian government to help companies that are working on the research and developmental activities.

R&D Tax Incentive Can Help Boost InnovationThis is started by the AusIndustry. This is an independent statutory body established under the IR&D act. This organization overlooks all the administrative tasks related to projects/businesses that work on Innovation and research. It also takes assistance from the Digital Economy update – which gives a complete picture of the digital state of Australia.

With the help of this scheme, all companies working on research activities are eligible to claim a credit from the government. This credit could be in two possible ways:

1.  A credit in the form of cash payments – which is obtained from the government.

2.  The tax offset – a reduction in the amount of annual taxes payable to the government – essentially, meaning that you can pay less in terms of your CTs.

With the help of the credit that you get from the government, it is helpful for a business in the following ways:

o  You can conduct your research activities without having to think much on capital expenditure – because a major portion of your expenditure can be claimed under the R&D tax credit incentive.

o  Be open to ideas and also be adaptive to change, because a large number of costs  like your employee costs, contractor costs, sub-contractor costs and even the software cost to some extent can be claimed under this initiative.

o  You do not have to think about profit and loss of your business – this scheme is applicable even if your research does not show any profit at the end of the research cycle.

The other advantage that you get from this facility is termed as the R&D tax credit finance. There is a huge amount of risk that your company is bearing because of the research activities – the end results are not determinable. Also the capital expenditure is high. Hence to facilitate your growth and sustenance, the government has approved of R&D tax credit finance. Some companies will be ready to fund and finance your research activities. However, you need to be aware that the R&D tax funding that you receive from this scheme can be used only for research activities and not for any other purposes of running your business. There will be certain terms and conditions that are associated with this type of finance. Just be aware of the general terms and conditions and also the rate of interest with which you need to repay your parent company. You need to repay your parent company only after you avail the R & D tax credit amount from the government.

The process of claiming the R&D tax credits is also very simple. This needs to be done along with your CT (Corporate Taxes). You need to mention the details of your research activities by providing a technical write-up. A technical write up should contain all the details of your research activities, people involved, the target date of the result of your activities and the day to day cash transactions and cash flows of your research activities.

Companies are satisfied and more companies can be encouraged since elaborate support is provided from the government in the form of R&D tax credit incentive.