One of the main issues I find with smaller and medium businesses is that they want to grow and develop but can’t find the time or the cash.
As far as finding cash goes, you can drive around looking for the end of the rainbow or you might be pleased to know that there are many grants available for SMEs from the government in order to give your business a leg up. There are tax incentives as well, which 70% of businesses could be claiming but aren’t, so I went looking for the answers as to why this is the case.
To help us with this, I spoke to a well-known expert in the space – George Mirabelli from Softlogic Solutions.
Craig: First of all, some business owners think they are too small to receive business grants. What sized businesses are eligible for grants and tax incentives? And what are the most common grants available?
George: Thanks Craig, I try to direct business to funding grants and incentives that are always available to any business meeting the relevant criteria.
Firstly, the Entrepreneurs program is available to businesses in a range of sectors. Once you apply, you will have a business specialist assigned to you (or if you contact me, I can direct you to the best ones we have come across.) They will provide guidance and recommendations on business improvements that you can make. Once agreed, they will contribute up to $20K for each dollar you spend on the agreed projects. This is a great way to solve a key issue with some valued assistance – you need to have a turnover of $1.5M plus and be an Australian company.
The next one to mention is the R&D Tax Incentive. This is open to all businesses that are conducting R&D [research and development]. You’d be surprised by what is deemed R&D. If you are developing a system, process, device or product that requires experimentation to prove that it does what it is meant to do, then you are likely to be eligible. Typically writing it up correctly is important and keeping all the records is also important. It is best to contact me for a brief strategy session to see if this might work for you. We can confirm that your R&D might be eligible, that you are investing more than $20K on it and are an Australian company. From this, we can try to determine your likely rebate.
Once you have started conducting your R&D, if you plan to commercialise it then you need to contact the Innovation Connections team on business.gov to apply for the Commercialisation Accelerator. This program will contribute up to $250K dollar-for-dollar with your investment to help you go to market with your product. It is important that you have not sold any units when you apply and are an Australian company.
Finally, the Export Market Development Grant is available for those planning to open an export market. Starting next financial year, you will need to apply before you make your investment of up to $150K. This covers protecting your IP through to arranging local resellers, attending trade shows and identifying manufacturers etc. It is important to keep diaries and that the people you are meeting with are not already contracted or participating in your R&D.
As you can see Craig there are some great options that apply in most sectors. We have assisted software development, medical device, pharmaceutical and automotive product development businesses.
C: Other business owners have said that they are eligible but they can’t be bothered applying. Is the application process onerous and how should they get started?
G: If they are referring to competitive grants then this might be the case. They could spend $30K+ applying for a grant that might only have a 1 in 10 chance that you will be selected.
This is exactly why I recommend small to medium businesses look at the perennial grants that I previously mentioned because they are assured of a benefit if they meet the specific criteria for the grant or tax incentive.
The Entrepreneur Programme, Commercialisation Accelerator and Export Market Development Grant all require that you apply and obtain approval prior to spending the funds.
The R&D Tax Incentive is a self-assessment program that requires that the business review the criteria for eligibility of their R&D and keep the required records to substantiate their claim to receive the tax rebate. We provide training courses, template packs, coaching and support options to make this as cost-effective and painless as possible.
C: You focus a lot on the R&D Tax Incentive from the federal government. In lay terms, what is the R&D Tax incentive and how does it work?
G: Good pickup Craig, you can tell that I am passionate about the R&D Tax Incentive, this is due to how generous it is. If a business is profitable, then in addition to the normal tax deduction of the R&D costs you will receive a 16% rebate. If a business is structured such that it is making a loss and not paying tax, you will receive 43% back even though you are not paying tax. As you can see this is very beneficial.
Of course, with anything that is so generous, there is a catch. In this case, it means that you need to get on top of the compliance requirements so that you will be ok in case of an audit. AusIndustry aims for 1 in 4 of claims to be audited so it is best to be prepared. Having said that, with the right training you can get on top of this very quickly and start taking advantage of it in the current financial year.
C: Once a business is successful in receiving a grant, what must they do to keep compliant and the auditors off their backs?
G: In the event of an audit, AusIndustry or the ATO will start with a ‘Request for Information’, typically 50 to 150 questions about your claim. You have 30 days to reply using the information that you retained when conducting the R&D. This could be up to five years after the fact.
Knowing what records to keep such as your product strategy, project planning documentation, experiment plans and experimental results, and minutes of key decisions, along with well-structured expense records that separate Core from supporting costs, is essential.
I just mentioned some key terms such as experiments, core and supporting R&D and the need to assess eligibility. It all sounds onerous, but I assure you that with the guidance and process framework to follow, it can be quite straightforward. The better you set up your processes, the more likely you are to maximise the benefits.
Most businesses find that they are already doing most of the required processes, just too informally and not written down. The R&D Tax Incentive includes requirements for records that form part of the best possible R&D processes, so taking them on improves the integrity of your R&D. In most cases, with a few more steps and a little more formality to the process you can access all the benefits.
C: And lastly George, how can you help businesses with all of this?
G: Craig we help to demystify the R&D Tax Incentive through our R&D process training and workshops. We take the complexity out of the record-keeping by providing templates and tools that make compliance easier and as bulletproof as possible.
When you go through one of our training programs, you learn to conduct your R&D in a way that creates all the right records and soon becomes second nature to your teams. They will wonder why they were not doing it this way all along and you will get a huge financial boost to accelerate your R&D and the growth of your business.
You can contact George via his website R&D Tax Training, Workshops & Coaching where you can arrange a brief strategy session to assess the viability for you to access these funding options.