When I meet people who run their own business, I am often struck by the ingenuity, enterprising spirit and pride that goes with building a successful company.
They have carved a niche in their sector, take pride in their services and products and have the satisfaction of having overcome many problems along the way.
They are constantly watching the market closely for opportunities and finding ways to increase their profitability and clientele by entering any new space that becomes available.
I call this innovation but many business owners call it common sense. Many don’t realise there is a government subsidy for innovation within small business.
The R&D Tax Incentive is a generous program that offsets the cost of research and development undertaken by Australian companies. For every dollar spent on eligible R&D, the government provides a 45c tax offset.
Take a company with an aggregated turnover of less than $20 million that spends $200,000 on R&D in a given year. The 45c tax offset will see $90,000 credited to that company at tax time. If the company records a net loss, the offset is paid in cash.
Why does the government do this?
Mainly because of the pressures acting on small business when faced with the potential for growth or the need to improve products and processes in order to remain competitive.
For smaller companies, investing in research and development is expensive with no guarantee of success at the end of the day.
If a company does not continuously invest and reinvent its product lines or service models, its business is going to coming to an end.
So the Australian Government steps in and says to small business – we will take a share of the risk in your research and development to support your investment.
The benefit to you is growth through product differentiation and efficient new and improved processes.
The benefit to Australia is a thriving knowledge economy, enhanced production methods and competitiveness.
The question then becomes: am I doing legitimate research?
I can tell you most of the time, the answer is yes.
If you are solving defined technical problems because nobody else out there has a technology or process that will take your company the next step forward, the R&D Tax Incentive is for you.
And the onus is on you to report in detail the nature of your project and the technical development process you have undertaken – which in itself is a benefit.
Companies that register for the R&D Tax Incentive must look at their R&D in a purposeful way. They must plan and be systematic about developing and improving their technical products and processes.
This helps them effectively manage their investment, control their intellectual property and keep their investor – the Australian government – happy.
So if you are currently reacting to change, problem-solving day to day and not stopping to consider how your business activities fit into the definition of research and development, then you are throwing money away. You are not managing your risk.
Look in to the R&D Tax Incentive today. For more information subscribe to this blog, download this ebook, join the conversation.