Funding a new start up, or making an improvement to an existing product or service can be a costly business investment.
Hiring staff and contractors, investing in machinery, software or other assets might feel like an overwhelming spend.
But did you know there’s a way to claim large amounts of these investments back?
Research and Development (R&D) grants provide support for startups and companies across a range of sectors who are working on new or improved products, services, processes, materials, devices and more.
These grants are offered by many different countries across the globe.
Who can qualify for R&D?
“R&D grants are not just for scientists in white lab coats,” Explains Jason Hood, CEO of the R&D tax incentive firm BourkeHood. “Organisations across all industries may be eligible. This can include anyone from dentists and aerospace technicians to pharmacists and software developers. R&D can be an absolute game-changer for a startup or existing company in any industry.”
What can I claim for?
Companies can claim for activities such as employee and contractor costs, computer and IT costs, vehicle expenses, equipment hire and internet hosting. If an R&D claim is done correctly organisations can usually recover anything from $50K – $200K.
The claim doesn’t need to be focused on the successful outcome of the project. As Jason explains, detailing the path and the lessons learned is perhaps even more important than highlighting the success.
“The assessor wants to see the journey of your project, not just the outcome,” Says Jason, “They want to see the so-called failures that you learnt from. They want to see the challenges you faced and how you overcame them.”
How can I use R&D on an international scale?
R&D is available on an international level. Each country will have its own guidelines around R&D tax incentives.
“When thinking about R&D on an international level, it’s important to consider where the parent company is located.” In Australia, R&D is set at a return of 43c to the dollar, with a $20 million cap for SME. However, the rate and cap varies across countries with the USA and New Zealand having no limit on how much can be claimed.
Jason advises to research the R&D guidelines in your particular country prior to starting your project. This is because some countries allow for a proportion of R&D grant money to spent offshore, while some do not.
“Don’t skip this step,” warns Jason, “You might discover later that there’s a limit on your R&D spend abroad. You may set up an entire team offshore only to discover you could have employed someone locally, and saved money!”
How can I make sure my company will be eligible?
Accurate and up to date record keeping is the best thing you can do to make sure your organisation is eligible for R&D incentives. According to Jason your record keeping will have two parts. The first part is the record keeping related to your project management.
This includes the roadmap you followed, any pivots to your strategy, meeting minutes, milestones you reached and any plans you made that didn’t eventuate. The other half is your financials relating to costs, profits and staff or contractor hours.
“The more information you have at hand, the easier it is to fill out an application, and the more you can claim for.”
Why use a specialist firm instead of my accountant?
If you’ve heard of the R&D grant and think you may be claiming it through your accountant or internal team already, Jason advises to proceed with caution.
“It’s really better to use a specialist. Accountants or your internal team will often not know what the ATO, or relevant assessor in your country will be looking for. A specialist firm has the experience and knowledge to write your applications effectively, and knows in detail what you can and can’t claim for. If you try to DIY you might end up missing out.”
Is there anything else I should know?
When claiming R&D it’s important to keep in mind that Governments actually wants to hand out these grants. R&D will help your organisation fast track its product or service, which means it will be available on the market sooner or be of a higher quality. This allows buyers to access your product sooner or be happier with it, which means more money is spent and the economy gets a boost.
Jason Bourke is the CEO of BourkeHood a global R&D consultancy, is on a mission to empower companies to grow with innovative funding options. With offices in Australia, New Zealand, United Kingdom and the United States and valued clients across a multitude of sectors and business sizes, Jason can provide expert advice or case studies about the industry.