Can I get a tax break for innovation being developed by my company?

If you are developing a new or improved product, service or process, you may be entitled to an incentive (the R&D tax incentive) by way of your company tax return, as a tax offset, or tax refund if you’re in tax loss, of up to 45% of your expenditure. As an example, for a company with an aggregated turnover of less than $20 million that spends $200,000 on R&D in a year, the tax offset will see up to $90,000 credited to that company at tax time. If the company records a net loss, the offset is paid in cash. This represents an after-tax benefit of 15c in the dollar, while for larger companies with turnover exceeding $20 million per annum it is 10c in the dollar. To access this offset, the rules require that you be generating new knowledge, by way of experimentation, to prove or disprove a hypothesis, and that you keep records to show this.

You may be in manufacturing, software, services, design, the arts, advertising or marketing. These industries are not all in themselves typically associated with “research and development”. However, it is the intersection of these pursuits with digital technology that may open up the opportunity to benefit from this program. One of the indicators that a company is undertaking eligible R&D is the type of employees that are working for you. If you employ, directly or under contract, people with a technical qualification, such as engineers, mathematicians, IT professionals, then it may be that your company is entitled to this tax offset.

Article written by Melanie Reen, Michael Johnson Associates.

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