The MYTH that Research and Development (R&D) is exclusively for large businesses is debunked, with companies under $20 million in turnover expected to have earned a substantial $2.54billion through the R&D Tax Offset in 2022/23 (Federal Government report). This offset, constituting 43% of R&D expenditure, implies that SMEs spent a significant $5.9 billion for R&D.
While the Income Tax Act provides the rules for R&D, some Accountants may avoid R&D questions, thus presenting an opportunity for those offering “Advisory Services” to SMEs engaged in R&D projects.
The process begins with an “IDEA”, and SMEs, especially those operating as companies with over $20,000 in eligible R&D expenditure, need to embark on a systematic progression of work. This involves a ‘Prior Art Search’ to determine whether someone (in the world) has already undertaken similar research activities – if so, your client will not be able to claim this expenditure as part of the Research and Development Tax Offset Claim.
Documentation of search mechanisms, identification of core project activities, and determination of new knowledge to be produced is part of the initial process. A hypothesis is established, and ideally an R&D Plan is submitted for approval by the Company’s Board of Directors. Throughout, meticulous documentation of experiments and the results achieved is essential.
Promoting R&D assistance can be a mainstream service for Accountants and Bookkeepers involved in Advisory Services. Implementing R&D processes involves assisting SME clients in preparing documentation to substantiate R&D expenditure for claiming the R&D Tax Offset.
This proactive approach positions some Accountants and Bookkeepers as Facilitators in the INNOVATION JOURNEY for SMEs.
Furthermore, the MYTH that only positive experiments qualify for the R&D Tax Offset is dispelled. It doesn’t matter if the experiment was a failure as long as appropriate documentation was maintained.
The first lodgement to Government is the ‘R&D Tax Incentive Application’, submitted to AusIndustry within ten months of the end of the financial year, triggering potential refunds for loss-making SMEs.
Taking action in promoting and assisting with R&D activities is crucial, especially with only three months remaining for the 2022/23 FY R&D Tax Incentive application lodgement.
ESS BIZTOOLS has developed the Research and Development Product Package, to assist Accountants and Bookkeepers to deliver R&D advice to SME clients.
Click here for our article “Research and Development from the Myth through to Creating Wealth” which is a communication that ESS BIZTOOLS has produced for Accountants/Bookkeepers Subscribers to send to SME Clients and Prospects.
If you would like to discuss “Research and Development Advisory Services Delivery to SMEs” please contact Peter Towers on 1800 232 088 or peter@essbiztools.com.au
Peter Towers – Managing Director | ESS BIZTOOLS Pty Ltd
Telephone: 1800 232 088
Email: peter@essbiztools.com.au
Website: www.essbiztools.com.au
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