Following the recent Australian newspaper?s Innovation Challenge, in which Wagners captured attention with its ?earth friendly concrete?, it?s timely to ponder the cost of ? and support for ? doing research and development (R&D) and innovating.
Opportunities abound in the quarrying and extractive industries to create better products, deliver new services or to provide the same outcome in a better way. Capturing these opportunities often requires an R&D effort, which may be undertaken as part of production or service delivery, might be done in a test environment, or could combine both.
Whichever approach companies take to innovating, there will be a cost ? but that cost can be partially offset with government assistance. There are numerous programs offered by the federal, state and even local governments but the stand-out among them is AusIndustry?s R&D Tax Incentive.
This program each year gives businesses over a billion dollars (uncapped) to do R&D, making it the most generous innovation support program in the country. The Tax Incentive is also an entitlement for companies doing R&D, which means if your organisation meets the requirements, it is entitled to access the funding ? so unlike some grant programs, your company is not in competition against other claimants. Finally, it supports R&D in all industries, from construction to mining to manufacturing, and everything in between.
At an individual company level, the R&D Tax Incentive is noteworthy for offering a 45 per cent refundable tax offset for companies with a turnover under $20 million and a 40 per cent non-refundable tax offset for companies with a turnover above $20 million.
In this context, ?refundable? means that if you have no tax liability, then the tax offset can be refunded in cash to the company, rather than carried forward to offset future tax liabilities. For example, if a company with less than a $20 million turnover is in a tax loss position and has spent $1 million on R&D, the company may be eligible for a refund of up to $450,000.
For those companies eligible for the 40 per cent non-refundable tax offset, it equates to a net cash benefit of 10 cents for every dollar spent on R&D. If the company is in a tax loss, it won?t be eligible for a refund but the offset can be carried forward for use against future tax liabilities. In this case, if a company spends $1 million on R&D, the net cash benefit to the company will be $100,000.
WHAT COUNTS AS R&D?
In order to gain access to the R&D Tax Incentive, companies must undertake activities that meet the definition of eligible R&D activities. Broadly, for activities to meet the definition of eligible R&D activities, they must meet the following criteria:
- The activities must be experimental.
- The outcome of the activities cannot be known in advance.
- The activities must be based on principles of established science.
- The activities must proceed from hypothesis to experimentation, observation and evaluation leading to logical conclusions.
- The activities must be conducted for the purpose of generating new knowledge.
Examples abound of the types of quarrying and related work that could meet the above criteria. These include:
- Developing or significantly modifying equipment.
- Developing new processes to extract resources more efficiently.
- Developing new products, eg Wagners earth friendly concrete.
- Creating new ways to manage or utilise waste.
- Establishing how particular equipment performs if used in a new way.
Applications are now open for the 2012-13 income year. The deadline for applications is 10 months after the end of the company?s financial year. For 30 June, 2013 balancers, the registration deadline is 30 April, 2014.
CLAIMING THE TAX INCENTIVE
The process of claiming the R&D Tax Incentive involves the following steps:
- Identify the company?s eligible R&D activities in the income year.
- Complete and lodge the R&D application with AusIndustry. The application includes information about the projects undertaken during the year and registers these activities, allowing you to claim the R&D Tax Incentive in your tax return. For more information, visit www.ausindustry.gov.au/programs/innovation-rd/RD-TaxIncentive
- Complete and lodge the R&D Tax Incentive Schedule with the Australian Taxation Office. This quantifies the amount of expenditure incurred on R&D activities and provides the amount of the benefit for inclusion in your income tax return. For more information, visit www.ato.gov.au/Forms/Research-and-development-tax-incentive-schedule-instructions-2013
FOR HELP TO GET THE BENEFIT
With offices around Australia, Price Waterhouse Coopers (PwC) can help your organisation navigate the complexity of the R&D Tax Incentive and ensure it receives the benefit it is entitled to. The services PwC provides range from reviewing R&D applications and schedules prepared by companies to managing the claim process from end to end by assisting companies.
Source: Price Waterhouse Coopers