R&D and grants update

In the current economic climate, invoice payment times are blowing out for many companies in the manufacturing sector, and access to grants and other finances has got tighter.

To help cashflow, you may want to consider other options of funding.

For companies undertaking research and development (R&D) activities, the Federal Government’s primary means of support is the R&D Tax Incentive program.

This is a broad-based, entitlement program, meaning if a company performs eligible R&D activities, it’s entitled to make a claim.

THE CASH BENEFIT

There are two levels of support available:

•    For companies with turnover of <AU$20 million, a refundable tax credit of up to 43.5c per $1 spent on eligible R&D; and
•    For larger companies (AU$20 million+ turnover), a non-refundable tax credit between 8.5c and 16.5c per $1 spent on eligible R&D.

This means that for $300,000 spent on eligible R&D activities, there is a cash benefit of between $25,500 and $130,500 available to your company.

In manufacturing, the types of R&D activities can range enormously from the development of new or improved products or processes (for example, for medical equipment or in the FMCG sector), the implementation of new manufacturing processes and production lines or the development and trialling of new equipment (such as in Defence and Engineering).

Contact RSM now for a free, no obligation discussion to determine if your company may be eligible to make an 2022 R&D claim prior to the upcoming deadline!

TIMING IS CRITICAL

Companies can access the R&D Tax Incentive annually. To do so, you must lodge an application form within ten months of financial year end to register the eligible R&D activities.

For the 30 June 2022 year end, companies have until 30 April 2023 to lodge the R&D application form. The eligible costs are lodged via the Income Tax Return (which can be amended for the R&D claim if this has already been submitted).

In addition, once 30 June 2023 passes, the company can register and claim for this current income year also, so can potentially access R&D funding twice this year.

For those accessing large R&D refunds, there are R&D financiers who specialise in financing against the R&D refund in advance, i.e., as the money is being spent during the financial year and thus allowing you to access your cash earlier. If this advance is spent on more R&D activities, it automatically increases your potential R&D claim for that year as well.

GRANTS

There are many grant programs available for your business in relation to both manufacturing and production activities or site development. This might include factory expansion, attracting regional talent, building a new manufacturing facility, or solving challenges faced by the industry.

Both the Federal and State governments offer grant programs, so too are corporates and community organisations. For example, the Coles Nurture Fund aims to help Australian food and liquor producers innovate and grow.

Other grants include the Export Market Development Grant (EMDG) which is administered by Austrade to assist companies with export activities to take products into global markets.

The grants landscape is ever-changing. Grant opportunities can be open for specific rounds of funding or available continuously throughout the year.

They can also be matched funding which require your business to provide funds in addition to the grant award, or they can be one-off payments.

For further information

To learn more about R&D and grants, please contact your local RSM office.

Article source: Manufacturers' Monthly