Are you an innovator writing new and improved software?
There is an odd perception, held by many in business, that software development is treated differently under the R&D Tax Incentive (the Incentive).
This perception is largely false and I believe it is potentially holding back investment in new and evolving information technologies to our detriment.
So where did this perception come from?
Historically, it comes from one or two documents issued by Ausindustry who is responsible for determining eligible R&D activities under the Incentive. The implication was that it was harder to qualify software development as eligible in comparison with other industries.
This inaccurate position has since been clarified as not the case by AusIndustry – but the perception persists.
I also think that because computer software is such a pervasive tool in business – used in manufacturing processes, inventory control and logistics to name a few aspects – that we find it difficult to see it as a science in its own right.
It feels like claiming the use of your brainpower or the tapping of keyboards as R&D in this field is somehow outside the norm.
But to ignore the role and potential of claiming eligible software development under the Incentive is to miss an opportunity to increase the market competitiveness of your business.
The Incentive rewards R&D activities that aim to solve defined technical problems. With regards to software, there is one additional simple eligibility criteria around intended use.
The Incentive rewards R&D activities that aim to solve defined technical problems. With regards to software, there is one additional simple eligibility criteria around intended use.
If your aim is to sell the software you produce, it’s in.
If your aim is to improve the internal administration of your business, it’s out.
And in terms of general eligibility, if your aim is to develop a new system that surpasses previously available functionality – and there is nothing else like it on the market – it’s likely to be in.
If your aim is to build a glossy website from existing tools – it’s out.
But if your bespoke website or application is business-to-business enabled and has lots of special functionality, aspects of its development could indeed qualify.
And where your unique software application is part of the process used to develop or manufacture your product, the Incentive applies.
You can see there is complexity in this area.
Involving an R&D tax specialist is a good idea as they have more experience identifying eligible software development activities.
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