Small businesses have been warned they are running out of time to apply for the federal government’s research and development grants, with a deadline looming at the end of the month for thousands of SMEs.
The grants, which reimburse companies for their research and development activities, are potentially lucrative sources of income for small businesses and can mean the difference for bringing potential products to a commercially viable state.
Adrian Spencer, founder of the grant consultancy group GrantReady, told SmartCompany this morning plenty of businesses are eligible, but don’t even know they exist and lose out on potential income.
“We’re meeting with a whole lot of companies which don’t actually know they’re eligible for these benefits, and then they get them, and they think it’s too good to be true,” he says.
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Many businesses, he says, don’t realise the grants aren’t capped.
The current R&D concessions allow businesses with revenue under $20 million to receive a refundable tax offset at 45 cents in the dollar for relevant R&D spend.
For businesses with revenue over $20 million, companies receive a non-refundable tax offset at 40 cents in the dollar.
The deadline for R&D applications closes 10 months after the relevant financial year, which for the majority of small businesses will be April 30. Spencer says while there are only a few weeks left until then, this is still plenty of time for businesses to submit their applications.
“There is time, and we’ve put claims in one the final day before, although it’s not ideal,” he says.
Spencer says there are three main types of documentation you need to prepare. The first is technical documentation actually describing the R&D work undertaken; the second is documents detailing the expenditure, and then the registration form.
“These can be prepared fairly quickly,” Spencer says.
Any business undertaking R&D activity needs to keep these documents by law, so Spencer says it won’t be a problem organising them, but there are a few other aspects of the application that may cause them some trouble.
“Your R&D has to be undertaken in Australia, and if you want to claim overseas expenditure, then you need to get pre-approval of that.”
“You also need to own the IP,” he says. However, businesses can also claim R&D expenditure for intellectual property they have “effective ownership”, which allows them to exploit the results of that research.
R&D also carries some restrictions and requirements. Activities called “core R&D” are those which are experimental activities, whose outcome cannot be declared in advance.
The other type of R&D activity is called “supporting”, and these are directly related to core R&D. Both types of research must be clearly defined in the application.
Spencer says businesses undertaking any sort of R&D activity need to apply, as they could end up receiving money which could better their research.
“We get lots of people saying they use the money to put back into their R&D efforts. If you’re eligible then you should look at applying.”