Access the R&D Tax Incentive

Tap into the financial benefits offered by the research and development tax incentive

BourkeHood's team of R&D and Tax Experts can help your business thrive.

R&D Consulting Service For Innovation Funding

BourkeHood is a global R&D Consultancy working across a multitude of sectors and business sizes to help clients apply for the R&D Tax Incentive.

Research and Development (R&D) tax incentive has become increasingly popular amongst startups as an innovative cash flow tool that allows them to inject funds into their projects as quickly as possible while maintaining full control of their business operations.

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R&D Tax Incentive at a glance

The R&D tax incentive is a form of a tax offset that allows eligible companies to claim back up to 43.5% of their development costs back as cash injection (if the company is at a loss position), or a tax credit (if in profit).
The R&D Tax Incentive grants are normally processed by the company’s accountant, financial advisor, or CFO, however, by working with BourkeHood, you can maximise your chances of success.
Our highly qualified team of consultants in science, engineering, software, tax, and accounting works in tandem with your team to discover unique areas of opportunity that often go unnoticed within the scope of individual research.

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What Activities Qualify

All R&D activity conducted in Australia;
Developing or designing new and/or innovative products or processes
Improving existing products, processes, or prototypes
Reviewing the potential of several alternatives or methods during the development or improvement processes.

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Eligible Expenditures

Categories include, amongst others: Employee Salaries and Subcontractors
Supplies consumed (e.g. raw materials, consumables, supplies)
Rental or lease costs of off-premise computers (i.e. computer costs, hosting costs)

R&D credit eligibility is much broader than many companies realize, applying not only to product development, but also to activities and operations, such as new manufacturing processes, software development, and quality enhancements.

Our Steps in processing your claim

Phase 1:

Technical Discussion

BourkeHood process starts with you. In Phase 1, we assign the consultant to your case who will be working with you to explore the scope and depth of R&D amongst your business activities and projects and gain an initial understanding of the potential claim value.

Phase 2

Claim Documentation

BourkeHood takes the legwork to prepare the technical narrative and financial documentation of your claim. Our unique ‘reverse audit methodology’ minimises the risk of post-submission questions, whereas our dedicated team ensures a straightforward process.

Phase 3:

Financial Calculations

After collecting the necessary information from you regarding your R&D projects and costs, we calculate your eligible R&D expenditure on a project-by-project basis.

Phase 4:

Lodging

BourkeHood prepares your application for lodging which then needs to be submitted as part of your Corporation Tax together with your Accountants. Once approved, you will receive the full benefit.

R&D Tax Incentives

Our Sectors

Become the right R&D candidate. Any organization or business that spends time and money on innovation is eligible for the R&D tax credit.

Science

Any advancement in the scientific field qualifies for the R&D credit. This includes the enhancement of the existing products and processes of applied sciences. Veterinary Science, Renewable Energy, Agriculture, or activities related to other science-related projects such as Chemistry, Sports Science, and Food Science are eligible for the tax credit.

Software

The software industry is a strong candidate for R&D incentives. The sector is a burning zone for innovation and development. Businesses making new developments in the Artificial Intelligence domain and companies working on quality improvement of existing software and prototype or investing time in designing new systems qualify for the R&D tax credit.

Engineering

Engineering is a field that makes the best benefit from the R&D credit. Processes related to technological improvements, developing the latest manufacturing methods, and introducing new engineering designs or projects can avail the R&D credit. Domains like environmental, mechanical, electrical, civil engineering, etc., stand top in the line for the benefits of the credit.

Frequently Asked Questions about R&D Tax Credit

Does the intellectual property (IP) generated from the R&D in Australia need to be held in Australia?

No, it certainly doesn’t!

The overseas parent company can own the IP without impacting the eligibility of the RDTI.

All your company has to do is be aware of its international tax obligations and transfer pricing issues, especially when the parent holds the IP offshore.

Moreover, it is an eligibility criterion, a formal binding agreement structured and executed between the parent and subsidiary. This is done to clarify the relationship between the parties and the mechanisms. The Australian entity generates future income through this, corresponding with the risk it is undertaking through the R&D program.

Of course, this varies depending on the IP ownership status!

Again, this is a complex area of the RDTI and would warrant further future discussion involving your Foreign-based legal and tax advisors.

How do I claim the R&D tax incentive?

If you are in search of R&D financing, we always recommend you work with a reputable R&D tax offset advisor. If not, you can certainly self-file your tax credit application as well!

However, some essential elements come with it:

Filling in your company tax return;
Explaining how your activities meet the requirements for claiming the tax credit (often referred to as a ‘Technical Narrative’.
Explaining how you arrived at the final amount.

How do I keep appropriate records?

This is surely the tricky bit here.

In addition to everything aforementioned, you have to come up with proof as to how your spending fulfills the R&D qualifying requirements.
Keep in mind this would involve careful record-keeping of your eligible R&D activities!

The great thing is that the ATO, in collaboration with the Department of Industry, Innovation, and Science (AusIndustry), has developed a handy fact sheet that covers everything you need to know about these “record-keeping requirements” for the research and development tax offset. From relevant information regarding record keeping, like which records need to be kept, to up to what extent the detail needs to be captured, and for how long. Rest assured, you can find it all here!

After all, keeping accurate records of your eligible R&D activities will only assist you in avoiding a compliance or risk review if the authorities decide to analyze your claim a bit deeper.

I don’t have a product yet – can I still access the R&D Tax Incentive?

Yes, you can!

The criteria for the R&D Tax Incentive is purely activity-based, not outcome-based. Regardless of whether you may be working towards having a product or still in the research phase, you have nothing to worry about.

Do keep in mind that the key here is that you are conducting experimental activities and looking for new knowledge that isn’t accessible otherwise.

So, you may never achieve a product, BUT as long as your experimentation results in new knowledge, you may be eligible.

Is my company eligible to claim the R&D Tax Incentive?

To be eligible to apply for the 43.5% refundable tax offset, your company (or company group) must have a yearly turnover of less than $20 million and an annual R&D expenditure of at least $20,000.

Additionally, the company must be:
Incorporated in Australia, or
Incorporated in another country but need to be an Australian resident for tax purposes, or
Incorporated in a country that has a double tax agreement with Australia and undertakes R&D activities through a permanent establishment in Australia.

Generally, trusts are not eligible – except if they are a public trading trust with a corporation pretending to be a trustee. Hence, companies that are exempt from tax are also not eligible.

What type of expenditure can I claim?

Eligible R&D expenditure is expended on eligible R&D activities and for R&D conducted in Australia through subsidiaries of foreign corporations.

The typical areas of expenditure include:

Australian CRO costs
Clinical trial materials
Australian representation/project management costs
Clinical trial insurance and TGA fees

Essentially, any Australian activity and cost that has direct nexus to the R&D activity can be claimed. However, there are some exceptions, such as accounting fees, legal fees, interest, core technology purchases.

Why are R&D Tax consultants needed and what does an R&D Tax Incentive consultant do?

Tax consultants like AusIndustry and the ATO publish guidance on the requirements of the R&D Tax Incentive and how to apply for the program. However, achieving a fully compliant application is much more difficult than it looks, so mistakes are likely to occur if you have little experience with the program.

Also, the R&D Tax Incentive is a self-assessment program, so you will not necessarily know if your application is non-compliant. You may discover this some years later when AusIndustry or the ATO assess your application (check reviews).

Moreover, an R&D Tax Incentive consultant can make sure that your application is fully compliant on submission – see using an R&D Tax Incentive consultant.

Can R&D activities conducted outside Australia be included in a claim?

Yes, they sure can!

Although, to claim expenditure on R&D activities conducted outside of Australia, you must first obtain a ruling called an Advanced/Overseas Finding.

This process of obtaining an overseas finding is quite demanding but certainly worthwhile when activities conducted outside Australia lack the Australian capability or the access to a population of living beings. Especially activities that have a direct scientific link to Australian clinical trials and cannot be undertaken in Australia for reasons such as legislation. This process applies to some preclinical work, such as toxicology studies or even some clinical studies conducted in parallel with Australian studies.

There are four requirements for finding activities conducted outside Australia that are eligible under the R&D Tax Incentive.
They must be covered by an advance finding stating that the activities are eligible.
They should have a significant scientific link to one or more ‘Australian core activities’ registered or reasonably likely to be conducted and registered.

They also must be unable to be conducted within Australia because of one or more of the reasons listed below:

It needs access to a facility, expertise, or equipment not available in Australia;
Conducting it in Australia would contravene a law relating to quarantine.
It also needs access to a population (of living things) that are not present in Australia; or
Conducting the right activity requires access to a geographical or geological feature not available in Australia
Expenditure on activities conducted overseas must not surpass expenditure on certain Australian activities.

How does the R&D tax offset work?

R&D tax credits apply to either profit-making or loss-making companies to decrease the tax burden on the business. They can take it either as a cash credit or a current or future tax offset.

There are a few additional qualifying criteria for companies that make less than $20 Million in turnover for companies.

Your company would need to:

Undertake R&D activities that have experimentation.
Spend $20,000 and above on these activities in this relevant financial period.
Undertake these eligible activities in Australia.
Be defined as a company. Some forms like partnerships or trusts are not eligible.

How does the Tax Refund work when I am not profitable and not paying tax?

The RDTI works as a refundable tax credit or non-refundable tax credit depending on your annual aggregated group turnover.

For eligible companies that have an annual aggregated group turnover of less than AUD $20 million, the potential benefit is a refundable tax credit of up 43.5%.

So, when your company has a profit, you pay tax on the profits. When you have a loss, you obviously do not pay tax, instead, carry forward and accumulate losses into future years and offset these against future profits.

When all the losses are soaked up by profits, you pay the tax!

With the RDTI, if you have losses, you can ‘cash out’ them at the rate of 43.5% of your eligible R&D expenditure rather than carrying them forward into a future year.

Moreover, the size of the refundable benefit is a consequence of the size of the R&D expenditure and the size of the losses. In order to claim the full 43.5% as a tax refund, the tax losses MUST be at least the size of the R&D expenditure.

When there is a small profit and a large R&D expenditure, that is when you make a considerable refund.

What do I need to do to start?

It isn’t that hard, so don’t you worry!

Firstly, you MUST have an eligible entity to claim the R&D Incentive!

Remember, you cannot generally claim R&D expenditure prior to the date of incorporation of the Australian subsidiary because you cannot register R&D activities that took place before the date of the incorporation.

What kind of work will not be eligible for R&D tax incentives?

According to section 355-25 of the Income Tax Assessment Act 1997, some of the following activities is not considered for R&D:

Market research, testing, and development, sales promotion
Routine testing and analysis of the following: materials, components, products, processes, soils, atmospheres, etc
Activities aiming for the reproduction of a commercial product or service by copying any existing system or blueprint/plan
Activities that aim for developing, customizing, or changing computer software that is primarily used by the developer or affiliates developer
Research in the area of social science and arts, or also in the humanities
Any commercial, administrative or legal activities that are linked to patents or licensing
Prospecting, exploring, researching, or drilling for minerals or petroleum
Management or efficiency studies
Any activities in service of providing compliance with statutory requirements or regulations, like sustaining national standards or secondary standards

Who administers the R&D Tax Incentive?

AusIndustry (on behalf of Industry Innovation and Science Australia) and the Australian Taxation Office jointly administers the R&D Tax Incentive (ATO) in Australia.

AusIndustry, which is part of the Department of Industry, Science, Energy and Resources (DISER), is in charge of the applicant’s technical compliance.

The Australian Taxation Office (ATO) is in charge of financial and tax compliance.

Why should I consider the R&D Tax Incentive?

Effectively, the Government is subsidizing R&D in Australia via the R&D Tax Incentive. If you are undertaking R&D in Australia, there is a good chance that at least some of that R&D will qualify for the R&D Tax Incentive.

What you need to do to qualify is that you need to spend more than $20,000 on R&D, which is eligible under the program. You can claim up to 43.3% of that expenditure back from the Australian Government as a tax refund or tax credit.

If you are undertaking eligible R&D, then you should claim the R&D Tax Incentive. Unlike other Government (grant) programs, the R&D Tax Incentive is not capped, so if you qualify, you will receive a benefit.

What’s great is that you aren’t really competing with other companies.

"I was approached by Jason on LinkedIn regarding R&D Tax incentives and he explained to me how the process works. I wasn’t aware of this scheme before that and I’m glad he reached out! These guys know what they are doing and are experts in their field. I would advise any business who are looking to apply for this scheme to work with Bourkehood as they are professionals in this.""

Vishal

Proactive Software Ltd

""After reaching out to Jason and his team for the New Zealand RDTI from Callaghan Group and the IRD we were helped along the way to submit a very successful grant application. The grant we received exceeded $45,000 with their help. The team members we worked with stepped us through the process and provided a lot of the content for the grant application. They were available at all times and kept in constant communications. We are still working with them for the latest grant applications, use them , there is NO RISK or COST until you win the grant. No brainer really!!!""

Steve Shepherd

100Rails Limited

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