Living In The Time Of Recalibration – Why Should The R&D Tax Incentive Be Any Different?

April 9, 2020 Kris Gale

We hope that this MJA Update finds you and your families doing as well as possible.

One unavoidable consequence of the current pandemic is that certain words in the lexicon get rolled out as never before. Examples that come to mind are ‘unprecedented’, ‘uncharted’ and, yes, ‘distancing’. Another is definitely ‘recalibration’. Recalibration can take many different forms. Some look forward to a kinder, gentler world as the situation eases. Others see it as the chance to finally clean out the garage. Comedian Larry David sees this as an unprecedented (there’s that word again) opportunity to stay home and watch TV and actually be praised for it.

And so an opportunity for recalibration presents itself with the R&D Tax Incentive (the Incentive). We have previously looked at and supported calls to take advantage of the Incentive to roll out government support already owing to taxpayers who have conducted eligible R&D in the past months, earlier than the end of the relevant financial year. The program has a 35 year history so it is exactly the type of existing mechanism that the Prime Minister has emphasised that the Government wishes to make use of. In that regard, an initiative to utilise the Incentive in this way has updated its progress overnight.

Yet while we wait for some feedback from the Government on this idea, and, let’s face it, it has a bit on its plate at the moment, we encourage program participants to look hard at their current claiming practices. Our experience is that many taxpayers have developed a habit of affording a low priority to the preparation and submission of the annual paperwork (the Registration Application and the R&D Tax Incentive Schedule) as there is plenty to be going on with. And we get that. Day-to-day business always looms largest. As a result, in the case of many June year end taxpayers for example, the 30 April close date for registration applications becomes a deadline that necessitates a frantic flurry of activity in the back end of April. 

The Government’s recent announcement that the cut-off date for claims for the financial year ended 30 June 2019 has been extended to 30 September has been put forward as a pressure valve release for applicants yet to submit their applications. A benefit to business. But it’s actually a confusing message. By allowing companies to apply for a benefit 15 months after the year in question, it seems to be reinforcing the notion that claiming R&D is a low priority for businesses and is a reflection of the discretionary nature of the program. 

Whilst we applaud the opportunity that this the decision affords to companies that may not previously have claimed or are considering a return to the program, we submit that participating companies should be thinking hard right now about how efficiently they are accessing the available benefits with their current timetables and approaches to their claims. It should be recognised that the Incentive directly adds to the financial bottom line by providing a cash payment, a tax saving or a carried forward loss and is available as soon as you are registered and your final tax numbers are available. Every day that these tasks remain uncompleted is costing the company money. And it’s hard to think of a time when the sources of available money to companies have ever been in sharper focus.

In short, there has never been a better moment to reassess the value of a well organised, recalibrated Incentive claim. For example, if your next financial year end is 30 June 2020, you can lodge your registration application from 1 July. And you need that registration number at hand when you submit your R&D Tax Incentive Schedule as part of your tax return. You can’t submit the Schedule without it. If you are a December 2019 company, the claim process should be nearing completion right now. Not sitting in the ‘To Do’ tray. 

MJA is fully operational and geared up to assist its clients prepare and lodge their claims sooner rather that later. We are committed to securing your benefits in as timely and effective a manner as possible. We want to see the Incentive play a key role in shoring up and stimulating our economy in these trying times.

And, finally, may we take this opportunity to wish everyone a safe and secure Easter as we all look forward to better times ahead.
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Should you wish to discuss this issue further, please don’t hesitate to contact Kris Gale, on 0411 171 596 or kris.gale@mjassociates.com.au.