The 2015 financial year is now over. This means (amongst many other things) that startups can submit their applications for the Research and Development Tax incentives. However many Australian startups do not take advantage of this very important tax break because they are not aware it exists or it seems too complicated to explore. The reality is though, it is an uncomplicated and relatively pain-free process. So let's look at how startups can maximise their R&D Tax incentive refund.

The R&D Tax Incentive is the Australian Government’s key program to support R&D and innovation. It provides companies with up to 45 cents back for every eligible dollar, even in many cases where startup companies are not yet paying tax. It’s not just scientists in white lab coats that are eligible! In essence, any company developing new or improved products or processes could be eligible.

The program can provide much needed funding for startups, as they are usually pre-revenue and therefore eligible for a cash refund. The sooner you lodge your application and income tax return, the sooner you receive the refund, which enhances company cash flow.

The minimum expenditure to be eligible for an R&D Tax Incentive claim is $20,000 and the base level of expenditure to ‘justify’ an R&D claim is approximately $50,000.

Startups need to provide supporting documentation as part of the claim preparation process, and the ATO reviews this to see if the claim is eligible. Supporting documentation can take many forms – from emails between the development team to the discussion of technical issues.

When it comes to the funds being reimbursed, startups generally receive the refund within eight weeks of lodging the company income tax return. Companies first lodge the R&D application with AusIndustry, who then typically take up to 10 business days to provide them with a registration number.

Over the years it has become easier to lodge a claim, with companies like PwC launching services like Nifty Forms. This allow startups to lodge their claim online, which is then guided by specialised accountants who help them through the process. Thanks to these accountants the whole ordeal is relatively uncomplicated and pain free.

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