Some ambitious academics have their eyes firmly focused on getting a slice of the Research & Development (R&D) pie that currently belongs to the SME sector.
Having suffered financially from a lack of foreign students during COVID, a number of tertiary institutions now want to renew their fortunes by injecting themselves into R&D work that’s currently being conducted by SME businesses.
In an article entitled “Ditch R&D Tax Concessions for Direct Funding” (Financial Review, 30 August), the Deputy Vice-Chancellor of the University of Sydney, Professor Emma Johnston, said tax concessions currently paid to SMEs should be scrapped in favour of direct federal funding.
This appears to be an obvious play to secure greater academic involvement in the R&D space.
Clearly, there are no benefits for academic research if R&D is only funded by tax incentives. Academia has no way of turning those tax benefits into real money, so they want the Federal Government to stump up cash on the table.
However, this blatant pitch for greater academic involvement ignores the considerable R&D activities that are already conducted by SMEs, who often use their own funds with only a limited amount of government support.
For an SME to claim their R&D work as a tax offset, the business has to be conducted as a company.
Incorporating is not always desirable when a business is in its formative stages and they’re trying to maximise the funds they have available for their R&D activities.
Companies with turnovers under $20m that are trading at a loss are able to claim a “cash refund” calculated at 43.5% of the eligible R&D expenditure. For most operations, this leaves little room for any academic involvement.
The Federal Government has a program known as “Innovation Connections” to help some SMEs bring in specialist academics to help them with their R&D activities. These companies are required to have an annual turnover of at least $1.5m to claim this assistance on a matched basis of up to $50,000.
Having to have such a large turnover to be eligible for even a small amount of academic assistance is not viable for many entrepreneurs.
Whilst the current system is not perfect, it does give some assistance to SMEs with their R&D projects.
Accountants and their SME clients should be concerned by any attempt to change the current system to benefit self-interested third parties at the expense of small business operators.
You can access an Introductory Flowchart on the R&D system at www.essbiztools.com.au.
Our contact details are:
Telephone: 1800 232 088
Email: peter@essbiztools.com.au
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Peter Towers | Ess BIZTOOLS
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