"Research & Development Shouldn’t Be In The “Too Hard” Basket!”

Accountant's Minute 263

“Some of the red-tape binding together the Federal government’s Research and Development Tax Incentive (RDTI) scheme is enough to make your head spin.

As a concept, these tax incentives are great; no one’s disputing that.

However, while the RDTI can make the costs of creating local innovations a lot less painful, the maze involved in even getting to the starting gate of a claim, is often enough for SMEs and their advisors to throw their hands in the air and dump the whole thing in the ‘too hard’ basket.’

It seems the problem with AusIndustry, the ATO and their political masters is that they’re tinkerers. They frequently change the rules governing claims. What was legitimate last year, may not be looked on quite so favourably this year. It can be hard to stay ahead of the game.

Despite that, Research & Development Tax Incentives are just what this country needs. 

The scheme encourages Australian companies, both large and small, to get serious about research activities, so they can create and produce innovative products and develop new markets around the world.

To qualify for RDTI, a company’s R&D process must be focussed on solving a technical problem, where the outcome isn’t known in advance.

In other words, this research has to be a genuine risk that’s targeted at a technical outcome, not a commercial one.

A company can legitimately research non-trivial software or hardware, with the aim of developing a product, process or service that can be engineered or manufactured.

For those eligible companies prepared to invest in R&D, and brave enough to tackle the claims process, there are significant benefits.

Under RDTI, companies can receive a 43.5% cash refund on their eligible R&D expenditure, if their annual turnover is less than $20-million.

We all know that many companies engaged in R&D operate at a loss during their initial development phase.

If a company does have large enough tax losses, then on, say, a million dollars of eligible R&D expenditure, they’d see the ATO paying $435,000 into their account within four to eight weeks.

Claims for companies turning over more than $20-million annually are limited to 38.5% of eligible expenditure.

To make a claim, a company must invest at least $20,000 in eligible R&D expenses during the tax year.

But, when it comes to making a claim, let’s face it.

Most SME companies are going to need the help of a trusted advisor to guide them through all that red-tape, if the claim is going to be successful.

In turn, those advisors, presumably accountants, will need access to well-researched and reliable information to bring them up to speed on the processes involved.

There is a comprehensive package available to help SMEs and their accountants understand who’s eligible for the R&D tax incentives, which deductions are acceptable and which have to be excluded.

This package uses easy-to-understand graphics that cover every aspect of the RDTI process and help ensure your claims are accurate and no expenses get missed.

This Research & Development Tax Incentive package is the result of 12 months of research from the accountancy information-specialists, ESS BIZTOOLS.

By working through a series of flowcharts, the person preparing the claim is able to see graphically each step they need to take and whether the claimed expenditure items meet the current guidelines.

For further information, please contact Peter Towers at ESS BIZTOOLS – 0418 190 181 or email peter@essbiztools.com.au.

This article has been prepared by Brad Smart, Managing Director “Selling the Message”.  If you’d like to talk to Brad about the type of assistance he could supply to your firm, please contact him 0418 311 011.

Upcoming Webinars

ESS BIZTOOLS’ free research and development webinars for accountants, business advisors and bookkeepers are being presented on:




Wednesday 10th March 2021 at 11.30am AEST (12.30pm AEDT) - Priscilla Bea Smith, Cloud Nine Associates “Accountants Time to Shine - Offer Research & Development Services” https://essbiztools-au.zoom.us/webinar/register/WN_FXMxwxLTR0Cq3Q1p5R-Bcg
Tuesday 16th March 2021 at 11.00am AEST (12-noon AEDT) “Research & Development - A Great Business Advisory Services Opportunity” https://essbiztools-au.zoom.us/webinar/register/WN_3tI7AqrWTkyEdTjx-a2Upg
Wednesday 17th March 2021 at 2.00pm AEST (3.00pm AEDT) “Research & Development - A Great Business Advisory Services Opportunity” https://essbiztools-au.zoom.us/webinar/register/WN_hi4QDlcuRgGaSHsjTfeT2A
Wednesday 17th March 2021 at 11.30am AEST (12.30pm AEDT) - Peter Milla “Converting R & D To Return On Investment” https://essbiztools-au.zoom.us/webinar/register/WN_4yzzyZRTR0q6n5XiDY4ggQ
Wednesday 24th March 2021 at 1.30pm AEST (2.30pm AEDT) - Mark Holton, Director, Smithink Pty Ltd “Research & Development Can Assist Accountants To Differentiate Their Services” https://essbiztools-au.zoom.us/webinar/register/WN_Ba9vOl6ZRZiE2ONGOryKtA
Thursday 25th March 2021 at 12-noon AEST (1.00pm AEDT) “Introducing Research & Development Services To Your Clients/Prospects” https://essbiztools-au.zoom.us/webinar/register/WN_NMBwwnGGSJe9SLGvRRscFA
Wednesday 31st March 2021 at 11.30am AEST (12.30pm AEDT) - Matthew Karakoulakis, Principal Solicitor, AMK Law “Legal Issues Relative to Research & Development” https://essbiztools-au.zoom.us/webinar/register/WN_i6TDxAE1Q7mmt5zvaX4GBQ
Tuesday 13th April 2021 at 2.00pm AEST Evaluating Research & Development Product Package” https://essbiztools-au.zoom.us/webinar/register/WN_Gu8QFtkmQGOLbgMHQ5pKtA
Thursday 22nd April 2021 at 12-noon AEST (1.00pm AEDT) “Evaluation Research & Development Product Package” https://essbiztools-au.zoom.us/webinar/register/WN_yO43YurFSFCrxC2o_frJ5w

Challenges Ahead

You are most welcome to visit our websites – www.essbiztools.com.au or www.essbizgrants.com.au where you can obtain information on government grants that are available for an individual client.

If you are interested in obtaining a free, no obligation overview of the Business Advisory Services Product Packages developed by ESS BIZTOOLS to assist accountants to deliver a wide range of Business Advisory Services without you having to reinvent the wheel by spending hundreds of hours in writing the material, please “Book A Demo” on the ESS BIZTOOLS homepage – www.essbiztools.com.au or contact Peter Towers:

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"Research & Development Shouldn’t Be In The “Too Hard” Basket!”