R&D Tax Credit -- Should We Apply?

[Cheng Yu]

For those of you who have applied for or are looking into the R&D Tax Credit, what was your experience?  

I'm developing a financial trading technology using artificial intelligence. Does the activity qualify for R&D Tax Credit? 

Thanks for sharing your perspective! 

[Hamish Ogilvy]

Yes, you should definitely do it if you're spending money and your outcome is unknown (sounds like it would be).

Pros - it's an entitlement, not assessed. So as long as you are R&D and you can prove you spent the cash accordingly you are ok. It's pretty painless, but you need to keep good records of experiments etc through the year. It's 0.43 per dollar, which can almost get half your spend back if you're heavy R&D.

Cons - yearly processing post tax return, so it can be nearly 18 months after you began spending $ before you get anything back, so it's not great for cashflow.

There are plenty of companies who will help you for a % of the claim, which is also worthwhile. Go talk to some of them and see if it works for you.

[Luke Durrant]

Circumstances are different for everyone go and speak to an accountant!

[Chris Were]

I completed our R&D claim with minimal pain using PwC's new online process. It was very cheap, but that was probably an intro offer.

Check it out here:

https://www.niftyforms.com/

On Fri, Apr 17, 2015 at 8:28 PM, Luke Durrant <lu...@squidee.com> wrote:

Circumstances are different for everyone go and speak to an accountant!

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[Hugh Stephens]

+1 that you should definitely apply. DIY or PwC's process (which is somewhere inbetween DIY and done-for-you) are definitely an option, but I also want to do a shoutout to Andrew and Dave who run Innercode – they are doing our R&D claims and the process has been super-easy, and they have been great to work with – no relationship other than a happy customer. And the costs I imagine will vary significantly – PwC works on contingency ('no win no fee') at ~14% of the returned amount, others will have different amounts so you can also shop around a bit.

But it's definitely worth applying, just keep in mind that it will complicate your tax return mildly (not in a cost sense, but you need to know that you're doing an R&D claim before filing your tax etc), and that it will apply to costs incurred in Australia (employees/contractors) only.

Hugh

On Saturday, 18 April 2015 10:39:43 UTC+10, tahpot wrote:

I completed our R&D claim with minimal pain using PwC's new online process. It was very cheap, but that was probably an intro offer.

Check it out here:

https://www.niftyforms.com/

On Fri, Apr 17, 2015 at 8:28 PM, Luke Durrant <lu...@squidee.com> wrote:

Circumstances are different for everyone go and speak to an accountant!

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[Andrew Flick]

In developing a financial trading technology using artificial intelligence, you should definitely consider claiming as it sounds like its right up the alley of the R&D Tax Incentive. However whether it qualifies or not depends just as much on how you go about your software development as it does what you are trying to create. The government is looking for development that has elements of experimentation within it. 

To benefit must also be spending money on your R&D, typically wages, contractors costs and overheads are claimed for software development. Finally you need to be spending the money through a correct entity, a proprietary limited company. Those are the basic hoops to jump through, but everyones situation is different and being a tax based scheme it is very dependent on the taxation situation your company is in, as to whether it is worthwhile to pursue and what benefit you could get.

As Hamish said it’s a pretty handy benefit for startups being an entitlement that’s 45cents on the dollar for your R&D spend. The most important part is that it can come back to you as a tax refund, which would apply to most pre revenue startups.

One thing to keep in mind is that claims are made on an annual basis, with a deadline of 10 months after the end of the financial year. If you are looking to claim expenses from 2013/14 financial year, you have less than 2 weeks now until that (30th April) deadline to register a claim.

Also, thanks Hugh for the shoutout, I’m glad that we’re starting to make a difference for Aussie tech startups.

[Patrick Collins]

I see the R&D tax credit as a massive opportunity for any tech startup in Australia. 

How much effort would it take to raise a Seed round of $300k? I can guarantee the compliance effort to secure the R&D tax credit is less work. 

Additionally, if you end up exporting the technology to the US you can then go and apply for the Export Market Development Grant and get an extra amount for that. It is like double dipping!

Make the necessary changes in your company to improve your odds of securing these two Aussie gifts.

I have encouraged many Aussie startups who are looking to expand into the US to take advantage of these great Aussie govt gifts. It may be tough to get, but it is still a gift. Go for it.

Patrick.

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[@iCentralCo @pc0]

I used MJA (Michael Johnson Associates) for a couple of real time software clients, very good result. Apparently they were involved in the original and subsequent industry consultation groups so have a a good relationship and insight to ATO. We are going to ask them and a few others in to http://icentral.co for a tax concession night after the current deadline work load rush passes if people are interested we could get two or three to speak on the same night and let people form their own views.

The issue is not so much being able to bash out the forms, more that you can survive a review later when you have already spent the money...

Cheers, Pete.