R&D Tax Incentive – end of financial year reminders | EMDG – Access the new unmodulated $100,000 first tranche payment

TCF NEWSLETTER | 22.06.2020

ASSOCIATED PAYMENTS – R&D ADVANCE AND OVERSEAS FINDINGS –

R&D START UPS –  EMDG – TCF SERVICES

The end of financial year is upon us again so I wish to remind you to finalise any transactions as required under the R&D Tax Incentive to ensure you don’t miss out on any potential return as follows:

Payments to associated parties

To claim eligible R&D expenses incurred from associated parties (by reason of family or business ownership connections) an R&D entity must have “paid” such expenses by the 30th June or the last day of the financial year for any non-standard reporting period entities. If for any reason these expenses are not paid by the 30th June, the R&D entity may elect to:

  • claim the expenses as a standard deduction in the year they are incurred (foregoing the benefits under the R&D Tax Incentive); or
  • after registering the eligible activities and expenses with AusIndustry, defer claiming the expenses until the following year when they are actually paid.

Advance and Overseas Findings

Provisional applications for Advance and Overseas Findings covering R&D activities which occurred in the 19/20 financial year must be lodged by June 30th

As an outcome of COVID-19 the scheme administrators have extended the period in which finding applications can be lodged to the end of September but this only applies if a provisional application is lodged by the 30th June – don’t miss out.

Please note that obtaining a positive Advanced or Overseas finding outcome from Innovation Australia does not ensure that all of the costs you wish to claim are 100% eligible unless you also obtain a ATO private ruling, this has been catching some claimants our recently.

R&D Start-Ups

R&D Start-ups – Founders may be better off taking a salary

If you are bootstrapping and not taking a salary to keep costs low whilst you kick off your R&D start-up business, think again, as this may not be in your best interests. By bootstrapping, you not only undervalue the intellectual property you are developing in your company but you may also negate your ability to claim a 43.5% reimbursement of the true costs incurred under the R&D Tax Incentive. If you are spending most of your time undertaking eligible R&D activities you should consider paying yourself an annual salary by paying PAYG tax and the associated superannuation guarantee levy related to any salaries by the end of June each year.

As the ATO puts no limitation on what you decide to do with the net portion of your salary you may decide to loan it back to your company, by doing so the net benefit would be the differential between the personal tax rate paid on the salary plus super versus the 43.5% tax offset earned by the company.

As the IP you are developing holds value, bootstrapping may result in a under valuation of your business when it comes time to raising capital because you have not substantiated the value undertaken in the early stage of the business.

Please note that Directors fees, franked dividends and trust distributions are not eligible expenses under the R&D Tax Incentive.

The Export Marketing Development Grant – EMDG

Applications for the 2019-20 grant year open on 1 July 2020, and in a further boost to exporters impacted by COVID-19, the Trade Minister Hon Simon Birmingham announced that the initial grant ceiling amount has been increased from $40,000 to $100,000.

Applicants who are entitled to a grant up to $100,000 will receive their full entitlement at the time of determination. Only grant amounts over $100,000 will be subject to a modulated  second tranche payment in June 2021.

The increase in the grant ceiling amount will ensure that the majority of EMDG applicants receive their full entitlement, providing a much-needed funding boost and a timely cash flow injection.

Applications lodged in the early months of July & August are generally assessed and paid within 4 weeks, so there is a clear incentive for exporters to prepare and lodge their 2019-20 EMDG applications as early as possible.

Export Performance Test

The Government also announced that the export performance test, which normally applies to applicants in grant years 3 and beyond, will not apply for the 2019-20 grant year.

Accordingly, eligible exporters will be able to seek up to 50% reimbursement for eligible marketing expenses without the secondary export earnings test applying.

Applicants are still limited to a maximum of 8 grants under EMDG, and the export performance test is likely to return in 2020-21.

Covid-19 Disruptions

Austrade have confirmed that expenses incurred during 2019-20 for activities that did not eventuate as a result of Covid-19, for example overseas flights or trade fairs, will still be claimable expenses provided the exporter has not received, or is not entitled to receive, a credit for those expenses.

Future of EMDG

The Government commissioned a review of the EMDG Scheme and export assistance in Oct 2019. The Review, chaired by SA exporter Anna Fisher, was to report to the Minister by the end of March 2020. Covid-19 has obviously changed the goalposts for not only the Review but also Government assistance in general.

We understand that the Review is being updated and revised, and will be provided to the Minister in due course. How the Government responds to the recommendations of the Review shall become apparent in the later part of 2020. While there is a commitment to export assistance, the Government is examining what is the most effective and efficient form of export support.

Services

TCF can assist  with free, no obligation services such as:

Give us a call.  We may be able to help your business.

Regards,

Gerry Frittmann and the team at TCF Services

R&D Tax Incentive inquiry pushed back again.

 

TCF NEWSLETTER | 12.06.2020

 

Reductions unlikely to affect 19/20 year claim lodgements 

 

The controversial changes to reduce benefits under the R&D Tax Incentive (RDTI) have been further delayed. The Senate Economics Legislation Committee was originally scheduled to conduct public hearings before delivering their report in April 2020. As an outcome of the COVID – 19 pandemic, public hearings will be held over the coming months with the committee’s report now expected to be delivered in December.

The Coalition government originally intended to pass the legislation for applicability to the 19/20 financial claims lodged in the 20/21 tax year, however, as a result of this latest delay, any proposed changes cannot be passed as Parliament won’t resit until February 2021 after which most claimants would have already accessed the existing benefits.

This would indicate that any changes made would not be retrospective – the very point that the Treasurer Josh Frydenberg would not confirm. We do however expect the RDTI offset rates to remain the same for 19/20 Tax claims.

 

What does this mean for you ?

  • Refundable (Turnover less than $20m): Your R&D offset rate for 20/21 will remain at 43.5%. This equates to a 16% benefit above the company tax rate for notional deductions.
  • Non-Refundable (Turnover greater than $20m – $50m): Your R&D offset for 20/21 will remain at 38.5% but as an outcome of the reduction in company tax rates top 27.5% the additional benefit equates to 11% above the company tax rate.
  • Non-Refundable (Turnover greater than $50m): Your R&D offset for 20/21 will remain at 38.5%. This equates to an additional benefit of 8.5% above the company tax rate

 

The future of the bill beyond December is uncertain

While the Government has committed to the new measures and a focus on reduction in R&D spend, the opposition has stated they “want a real and genuine engagement with the stakeholders who are going to be impacted” (Brendan O’Connor, Shadow Industry Minister).

The community response to these changes remains the same. Nearly 100 submissions were received during the initial phase of the Committee review of which nearly all were critical of the new measures.

If successful, the new measures are likely to apply to the 20/21 R&D claims.

 

Services

TCF can assist  with free, no obligation services such as:

 

Give us a call.

Regards,

Gerry Frittmann and the team at TCF Services

R&D Capital Partners $3million COVID Fund | R&D Tax Incentive and other Govt. Grants – Update

TCF SERVICES | R&D CAPITAL

NEWSLETTER | 30.04.2020

R&D Tax Incentive | Prepayment Loans | EMDG | MMF

 

Trying to navigate your business through the ongoing threat of the coronavirus whilst maintaining the security of your staff and clients will no doubt be a juggling act we will all have to manoeuvre for some time.  As such, industry assistance from both Federal and State Governments has never been more crucial, but don’t just look at current cash flow assistance stemming from the economic response to the virus. Other business grants and tax incentives are also available and can make an enormous difference to your ongoing viability.

 

TCF Services is OPEN for business

Like so many businesses around the country, we at TCF Services are following the Government’s advice to self-isolate with all our staff working from home. We are fully operational with our consulting team available during normal office hours and beyond. We have taken all appropriate digital security measures to continue working through our usual channels and are well equipped to service our client’s needs through this crisis.

 

R&D Tax Incentive 18/19 Financial claims

The cut-off date for end June 2019 financial year claims is normally 10 months after the year end being the end of April 2020 but AusIndustry has now extended the deadline to end September 2020. If your business is on hold and your looking for ways to survive, the time is now to work with an R&D tax consultant to check your eligibility and prepare your current 18/19 and 19/20 claims.

 

R&D Tax Incentive 19/20 Financial claims  

From 1st July, applications can be lodged under the R&D tax Incentive. If you incurred costs undertaking research and development activities please call us as you may be eligible to claim a cash reimbursement of up to 43.5%  against eligible costs incurred. All R&D companies should consider fast-tracking the claim preparation and contemporaneous record keeping requirements to ensure compliant claims.

Conversely, if you are planning to undertake R&D in 20/21 we also encourage you to call us so we can assist you with keeping the appropriate records to allow you to claim benefits in the following year.

 

R&D Tax prepayment loans

In addition, if you need cash NOW,  our sister company R&D Capital Partners is also able to prepay up to 80% of the expected cash refund expected from your clients 18/19 OR 19/20 R&D Tax claim. This applies to companies eligible for a refundable tax offset that are cashing out tax losses against R&D expenses claimed.

In response to the Covid-19 business impact on cash poor technology companies claiming the R&D Tax Incentive, TCF Services in partnership with R&D Capital Partners is offering reduced rates for a 6 month period only to provide:

  • R&D Tax prepayment loans of up to 80% against expected 18/19 or 19/20 financial year R&D tax cash refunds and;
  • R&D Tax claim services including the establishment of compliant record keeping practices.
  • Free scoping of other grant opportunities

Speak with David Tonkin,  Director of TCF Services  and R&D Capital, for more information.

 

Export Market Development grants:

This program has been under-funded for many years resulting in a modulated grant being paid to recipients of less than 50% of what they were entitled to. As part of the additional support provided by the Federal Government an additional $49 million has been provided so that all 2019 claims are fully paid in June. Perhaps it is a good time to consider preparing documentation now to be ready to lodge an application from the 1st July to enable a faster payment turnaround.

 

Manufacturing Modernisation Fund:

$50m Federal Government grant program which supports manufacturers to modernise, adopt new technologies, become more productive and create more jobs by co-funding capital investment and up-skilling your staff.

·        $20m will be allocated for small grants ($50,000 to $100,000) to support technology and efficiency improvements. Co-funding is on a 50/50% basis.

·        $30m will be allocated for larger grants ( $100,000 to $1m) to support transformative investments in technologies and processes. Successful claimants will be provided with grants equal to 25% of projects costs with the 75% balance funded by the claimant.

* Round 2 – Applications are expected to open in May with a end of June lodgement deadline.

 

TCF Services Pty Ltd has successfully delivered over $2 billion in tax incentives and  grants for its clients over the past 29 years.

 

R&D Tax Incentive Funding Consultants Services Government Grants Research and Development Australia

Call David Tonkin on 0411304445 or email david@tcf.net.au

Government industry assistance available NOW >> Govt. Grants | R&D Tax Incentive | Federal and State Stimulus Packages

TCF NEWSLETTER | 24.03.2020

R&D Tax Incentive

Government industry assistance available NOW

Trying to navigate your business through the ongoing threat of the coronavirus whilst maintaining the security of your staff and clients will no doubt be a juggling act we will all have to manoeuvre for some time.  As such, industry assistance from both Federal and State Governments has never been more crucial, but don’t just look at current cash flow assistance stemming from the economic response to the virus as other business grants and tax incentives are also available and can make an enormous difference to your ongoing viability.

Listed below, are a few current grant opportunities that may be worth considering as well as a Federal and State by State rundown on the cash flow assistance stemming from the coronavirus, be sure you don’t miss out!

Manufacturing Modernisation Fund:

A $50m Federal Government grant program which supports manufacturers to modernise, adopt new technologies, become more productive and create more jobs by co-funding capital investment and ups-killing your staff.

·        $20m will be allocated for small grants ($50,000 to $100,000) to support technology and efficiency improvements. Co-funding is on a 50/50% basis.

·        $30m will be allocated for larger grants ( $100,000 to $1m) to support transformative investments in technologies and processes. Successful claimants will be provided with grants equal to 25% of projects costs with the 75% balance funded by the claimant.

Round 1 – Successful applicants will be announced by the end of March

Round 2 – Applications are expected to open in early April with a end of May lodgement deadline.

R&D Tax Incentive:

It has been reported that over 800,000 SME’s in Australia had a payment plan with the ATO even before the virus hit. Despite negative press over the past 3 years concerning the behaviour of the scheme administrators in conducting heavy audit tactics to either reclaim or reduce benefits paid out, the recent Ombudsman’s report has now quelled this behaviour and claimants can now feel more secure in proceeding with making sound claims. As the benefit is delivered in the form of either cash refund or a tax offset to be netted off taxes owed, it’s a tremendous cash flow boost. As such we encourage all potential claimants to make claims without the fear of audit risk taking up your time and efforts to survive. The cut-off date for end June 2019 financial year claims is normally 10 months after the year end being the end of April 2020 but AusIndustry today extended the deadline to end September 2020, I would suggest you don’t wait, if your business is on hold and your looking for ways to survive, this is a great time to work with an R&D tax agent to pull your current 18/19 and 19/20 claims together. 19/20 financial claims can also be lodged from 1st July onward. All R&D companies should consider fast-tracking your claim preparation and contemporaneous record keeping requirements to ensure compliant claims.

Export Market Development grants:

This program has been under-funded for many years resulting in a modulated grant being paid to recipients of less than 50% of what they were entitled to. When the GFC occurred in 2007 the then Labor Government decided to pay out 100% of all claims as part of their stimulus package to assist industry. This very same initiative is now being lobbied for by exporters and may form part of the next tranche of announcements made to further assist industry. You heard it here first. If your business is on hold you may wish to consider preparing your documentation to claim from the 1st July as the earlier lodgements are made the quicker you will get paid.

Federal Government stimulus package

The Government yesterday released a second, far reaching $66bn stimulus package that boosts income support payments, introduces targeted changes to the superannuation rules, provides cash flow support of up to $100,000 for small business employers, and relaxes corporate insolvency laws.

The stimulus measures are not yet legislated, however, parliament reconvenes today, and it is expected that these measures will be legislated quickly.

The Prime Minister has warned that there are no “quick solutions” and that business should prepare for 6 months of disruption.

 What does this means for Small Business?

·        Tax-free payments up to $100,000 for small business and not-for-profit employers. An increase in the previously announced initial tax-free payments for employers to a maximum of $50,000. In addition to this, a second round of payments will be made up to a maximum of $50,000, accessible from July 2020.

·        Solvency safety net – temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and an increase in the time companies have to respond from 21 days to 6 months. Directors also are provided with temporary relief from personal liability for trading while insolvent for 6 months.

·        Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.

·        Sole traders and self-employed eligible for Jobseeker payment – the eligibility criteria to access income support relaxed for the self-employed and sole traders.

·        Temporary relief from some Corporations Act requirements

What does this means for Individuals?

·        Early release of superannuation – individuals in financial distress able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centre-                   link or Veterans’ Affairs payments.

·        Temporary reduction in minimum superannuation draw down rates – superannuation minimum draw-down requirements for account based pensions and similar products reduced by 50% in 2019-20 and 2020-21.

·        Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.

·        Supplements increased, access extended and eased – for 6 months from 27 April 2020:

·        A temporary coronavirus supplement of $550 will be paid to existing income support recipients (people will receive their normal payment plus $550 each fortnight for 6 months).

·        A second one-off stimulus payment of $750 will be paid automatically from 13 June 2020 to certain income support recipients (in addition to the payment made from 31 March 2020).

·        Eligibility for access to income support eased to include sole traders and the self-employed, and to those caring for someone infected or in isolation.

·        Waiting periods and assets tests temporarily waived.

·        Bankruptcy safety net – temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.

The Government has flagged that additional stimulus packages will be required, and we include below the detail in relation to each announcement.

Tax-free payments up to $100,000 for employers

·        From: 28 April 2020

·        Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.

The Government has increased the previously announced measures to provide cash flow support to business.

Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.

In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.

The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.
·        The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.

·        The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.

The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.

Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgements. The minimum $10,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.

·        See: Cash flow assistance for businesses

Solvency safety net

A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:

·        A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.

·        The time a company has to respond to statutory demands will increase from 21 days to 6 months.

·        For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.

·        See also bankruptcy safety net below

It will be more important than ever for business to stay on top of their debtors.

Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.

·        See: Temporary relief for financially distressed businesses

Access to working capital for SMEs – supporting lenders

The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.

SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

·        Maximum total size of loans of $250,000 per borrower.

·        The loans will be up to three years, with an initial six month repayment holiday.

·        The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look
through the cycle to sensibly take into account the uncertainty of the current economic conditions.

This latest measure builds on the previous initiatives to ensure small business can access capital, including:

·        An exemption to the responsible lending obligations to enable financial institutions to provide new credit, credit limit increases, and credit variations and restructures,

·        $15bn to the Australian Office of Financial Management to invest in wholesale funding markets used by small banks and non-banks to enable these lenders to support SMEs, and

·        Australian Banking Association members will defer loan repayments for 6 months for small businesses (affected small businesses will need to apply for relief).

Jobseeker payment’s

The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has been reduced, to access support.

More:

·        Income support for individuals

·        More financial support for coronavirus affected job seekers

Temporary relief from Corporations Act requirements

The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.

ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.

Early release of superannuation

From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.

To be eligible to access your superannuation you need to meet the following requirements:

·        you are unemployed; or

·        you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or

·        on or after 1 January 2020:

·        you were made redundant; or

·        your working hours were reduced by 20% or more; or

·        if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

More:

·        Early access to superannuation

Time limited fortnightly $550 ‘coronavirus supplement’

For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:

·        Job-seeker payment (and those transitioning to the job-seeker payment)

·        Youth allowance job-seeker

·        Parenting payment

·        Farm household allowance

·        Special benefits recipients

In addition, eligibility to income support payments will be expanded to:

·        Permanent employees who are stood down or lose their job

·        Casual workers

·        Sole traders

·        The self-employed

·        Contract workers who meet the income test

The Government notes that these criteria could include those required to care for someone affected by the Coronavirus.

Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply.

The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

More:

·        Income support for individuals

Second $750 payment to households

The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.
·        Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession card holders at any time between 12 March 2020 to 13 April 2020;

·        Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and concession card holders on 10 July 2020.

The payments will be made automatically to those that meet the criteria.

More:
Payments to support households

Bankruptcy safety net

A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

More:

Temporary relief for financially distressed businesses

State by State rundown of stimulus packages 

NSW:

·        The waiver of payroll tax for businesses with payrolls of up to $10 million for three months (the rest of 2019-20). This means these businesses will save a quarter of their annual payroll tax bill in 2019-20

·        $56 million to bring forward the next round of payroll tax cuts by raising the threshold limit to $1 million in 2020-21

·        $80 million to waive a range of fees and charges for small businesses including bars, cafes, restaurants and tradies

VIC:

·        $550 million which would go to 24,000 small and medium-sized enterprises with a payroll of less than $3 million as a payroll tax refund.

·        $500 million  into a fund for hardship payments, small grants and tailored support which would be distributed in consultation with the Victorian Chamber of Commerce and Industry, the Australian Hotels Association, the Australian Industry Group and other industry representatives.This money will go towards sectors that “really are doing it tough” who may not pay payroll tax and require more tailored support to survive.

·        $600 million, included a range of measures such as the waiving of 12,5000 venues’ liquor licence fees due this month and worth a total of $30 million

·        2020 land tax deferred for people that have at least one non-residential property and total taxable landholdings below $1 million.

·        2020 renewable liquor licence fees waived.

QLD:

·        $500m loan facility to  assist QLD business to retain staff.  Loans will be offered at a low interest rate of up to $250K over 10 years. The first year will be interest free.

SA:

·        $350 million stimulus package

·        Stimulus provides up to $100,000 to eligible small and medium sized businesses, and not-for-profits (including charities) that employ people, with a minimum payment of $20,000.

·        The Coronavirus SME Guarantee Scheme will support small and medium enterprises (SMEs) to get access to working capital to help get them through the impact of COVID-19.

·        Increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.

·        The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.

WA:

·        $114 million in measures to support Western Australian small and medium businesses.

·        Payroll tax paying businesses with a payroll between $1 million and $4 million will receive a one-off grant of $17,500

·        $1 million payroll tax threshold brought forward by six months to July 1, 2020

·        Small and medium sized businesses affected by COVID-19 can now apply to defer payment of their 2019-20 payroll tax until July 21, 2020

More Federal and State stimulus package announcements will be made over the next coming days and weeks.

Call Gerry Frittmann on 0413 647 664  or email gerry@tcf.net.au

The 30th April R&D Tax incentive lodgement deadline looms fast and why good record keeping is paramount.

TCF NEWSLETTER | 12.03.2020

R&D Tax Incentive

Please be reminded that if you have not already prepared and lodged your 2018/19 R&D “registration of R&D activities” application with AusIndustry, it is important to note that the 30th April lodgement deadline is looming fast for companies with a standard 30th June reporting year end.

It is also important to note that the R&D Tax Incentive is a self-assessment program requiring claimants to keep contemporaneous records that track the progress of their R&D activities and quantifies the costs associated with the activities being claimed. If you don’t have the records to substantiate your claim you are running a risk so it’s important that this is reviewed and established now.

Simple things like:

  • populating an annual R&D project plan,
  • writing monthly technical reports,
  • taking photos evidencing stages of prototype work and
  • completing weekly time-sheets for R&D staff

is paramount in maintaining your successful participation on the program as well as good business practice as it establishes and values your greatest asset; your IP.

Don’t get caught out!

Here are a few reasons why claims can be rejected after review or audit:

Poor and/or insufficient R&D record keeping – Records must be contemporaneous; projects must be broken down and tracked by activities (core, supporting and ineligible); Weekly time-sheets are required to confirm the percentage of time /salary to be claimed by R&D staff that relate to eligible R&D activities; Technical reports should be written regularly that evaluate the results of the experiments including knowledge gap evidence to prove the knowledge is not already in the public domain; evidence that the R&D manager or CTO is a competent professional in the field and not playing industry catch up or learning a new technique.

Whole of project claim approach – claiming the total costs of running the business whilst it’s in start-up phase with no revenue on the basis that it’s all risky and contingent on the success of the business.

Claiming business model innovation in absence of high levels of technical or scientific risk – just because the new business model disrupts the old and uses technology to do so does not constitute eligible R&D under the program.

Claiming unpaid associated party fees – if an entity or person is associated in any way with the R&D entity the fees for R&D services must be paid by the 30th June in the year of the activity to allow the benefit to be claimed and paid. Otherwise it must be carried over in the tax return until the payment is made, after which the benefit can be claimed in later years.

Claiming late superannuation payments – Claiming superannuation on R&D staff where the super was not paid on time or before the end of the financial year. Generally, compulsory superannuation payments paid late (outside the time limits) can’t be claimed as a business deduction, which also means that any late quarterly super payments relating to eligible R&D staff may not be eligible to be claimed under the R&D Tax Incentive. If the financial year’s last quarter’s super is not paid by 30 June (ie, acknowledged by the complying superfund as received by 30 June), then that contribution cannot be claimed as a deduction in that year and must be claimed in the following year – don’t get caught out.

If you require assistance with your 18/19 claim preparation or establishment of compliant record keeping for your 19/20 R&D activities or if you would like to discuss these matters further please contact Gerry Frittmann – Managing Director at TCF Services on gerry@tcf.net.au or contact your R&D Tax consultant at TCF Services.

Gerry Frittmann

Managing Director

Tax agents registration number 39849006

P: 02 8219 4900

How the government can help start-ups

Written by Adir Shiffman – executive chairman of Catapult Sports and a serial investor and entrepreneur.

Financial Review Article 18/02/2020

As we enter the 2020s the federal government finds itself unwittingly wielding the power to trigger a mass extinction event across the ecosystem of early-stage Australian start-ups.

Recently I was asked to nominate a key ingredient without which a startup is unlikely to succeed. My answer: cash in the bank.

Cash is the oxygen of every business, but for early stage pre-revenue startups it is something more akin to the artificial respirator in ICU. When I launched my first start-up in the mid-90s there was little funding beyond the few coins I gratefully accepted from wealthy people. There was only one reliable funding source for early stage start-ups at that time and astonishingly it came via the Australian Taxation Office (ATO). Through various names and incarnations this was always the R&D tax incentive.

Twenty-five years later, this incentive is still vitally important and every start-up I know has relied upon it at some point for survival. In the facilitation of an industry and the creation of mass employment, it is a singular factor to which one can attribute a transformative contribution.

But the government no longer believes the cost is so little and desires to cut spending by $1.8 billion over four years. While not all of this will come from early stage start-ups, it risks eradicating a significant portion of the current ecosystem and retarding the development of the next crop of startups. Problematically, the government has a good point that the system has been misused by some, and is a clearly flawed program. It lacks the requisite black-letter law clarity, and while it is easy to hate the ATO, it is forced to walk a discretionary tight rope and has historically performed admirably.

The translucence of these rules also spawned an entire industry of consultants, some great, some shysters, most in-between, but with some double-digit percentage of all payments eventually flowing there.

From a government perspective this represents a juicy ‘‘efficiency dividend’’.

It is a problem that,in the scheme, pre revenue start-ups are cast into the same murky pool as companies generating nine-digit revenue and even global tech giants undertaking local R&D.

At the same time the government is cutting the total program cost, its proposal includes a rise in the cap on refundable R&D by the largest enterprises, to $150 million from $100 million. The biggest problems, though, relate to an outdated ideology, disconnected from the dynamics of today’s industry. Most of the world’s start-ups develop software, yet the R&D rules are most unclear when it comes to the degree of applicability of software development programs.

In part this can be attributed to confusion with the fundamental concept of ‘‘research’’ and the misunderstood role of ‘‘development’’. For most start-ups building a new software application, research and development are inextricably intertwined. For example, large portions of the code written for a new application type (or a significant advance) are simultaneously both R and D. As we enter a new decade the historical distinction between research and development is frequently academic and the dividing line often blurred. The good news is that specific, targeted improvements can enhance the existing life-giving benefits of the R&D program while improving efficiency.

There are five obvious changes required:

1. Create three separate categories dividing pre-$20m revenue start-ups, larger Aussie tech companies, and overseas enterprises conducting local R&D.

2. Broaden the definition of research, and include software development.

3. Provide the ATO with crystal clear applicability guidelines.

4. Greatly simplify the calculation and submission process so that little outside help is needed, an online process pulling data from accounting packages would be best.

5. Establish an independent ombudsman with the power to quickly arbitrate any disputes.

If the Treasurer still believes he must reduce overall program expenditure as part of a broader budget objective then at least the above framework enables precise targeting rather than an approach bound to deliver unintended consequences.

It has the power to either create an even better next generation of startups, or to destroy much of what has already been built, so it will be a terrible shame if the legacy of this government is the blood of start-ups on its hands.

Adir Shiffman is executive chairman of Catapult Sports and a serial investor and entrepreneur.