How we can help
The Australian Government’s R&D Tax Incentive Program is one of the Government’s key programs that encourages innovation, promotes the creation of Australian-based jobs as well as intellectual property by providing a tax offset for eligible R&D activities. It is important that all Australian entrepreneurs to have a good understanding of this program to ensure that they receive maximum benefits for their business. It can be difficult to navigate the complexities and Pitcher Partners can help.
The R&D tax incentive can only be obtained on registered activities. You have until 10 months after the end of the year to register the activities; if they are not registered you cannot claim the incentive. We can assist you in identifying eligible activities, registering those activities, and lodging the income tax return to obtain the incentive. We have significant experience in assisting technology companies obtain the R&D tax incentive for a range of innovations.
The tax system has also been designed to incentivise investors to support innovative, high-growth potential startups with the Early Stage Innovation Investment Incentive. This is important not only for investors, but also for companies, as establishing that a company is an early stage innovation company will help in raising funds from investors.
From 1 July 2016 eligible investors can receive the following incentives for investments in early stage innovation companies:
- A 20% non refundable tax credit capped at a maximum of $200,000 (much lower for investors who are not “sophisticated investors”). i.e. a $1m investment would result in a $200,000 reduction to the investor’s tax liability if eligible.
- No capital gains tax on investments held for more than 12 months and less than 10 years. Market value cost base after 10 years so that the first 10 years of gain are ignored for capital gains tax. Note that both capital gains and capital losses are ignored.
Please note that these rules are complex and also depend on the investor’s personal circumstances so you cannot guarantee that they will receive the incentive. However, you can outline the opportunity to the investor to encourage their investment if you can position the company as an early stage innovation company. There are a range of measures aimed at limiting access to these concessions to external investors rather than the founders.
The process includes:
- Determining whether the company meets the requirements to be an early stage innovation company
- Determining whether the shares issued qualify for the tax incentives
- Advising investors if the above requirements are met
The investors must then consider their own personal circumstances in order to determine if they can get the 20% non refundable tax credit and CGT concession.
Pitcher Partners can ascertain whether your company is eligible and discuss strategies to extend the timeframe over which they will be eligible.