About the Client
Our client, a growing Information Technology consultancy with a profitable financial status firm and an aggregated turnover of $350,000, reached out to us for the RDTI application process. The company is developing a new software architecture and algorithm for an integrated platform-as-a-service automation solution (iPaaS). They decided to go for R&D tax incentives for the activities being carried out, but wanted to ensure the recorded activities and expenditures meet the government’s eligibility criteria.
The Challenge
The first issue our client faced was ensuring that the R&D activities carried out by the client could attract the tax incentive. To handle this procedure, we began with an eligibility examination to decide which R&D activities would likely qualify for the incentive and ensure compliance with government standards. This was important in ensuring that qualified R&D activities were met regarding the client’s new software architecture and algorithm development.
Once the Eligibility was confirmed, the following approach was to apply for registration for R&D with AusIndustry. We advised the client to do this registration within ten months after the end of the income year, which can be done no later than 30 April. Due to the tight time frame, the client needed to prepare detailed documentation such as the nature of R&D projects, activities, time frame, geographical location, and estimated expenditures. In this case, we realised the need to develop a list of authorities and responsibilities, develop a submission planner, and assign jobs for the application process.
Our Solutions
First, we helped the client complete the initial registration process with AusIndustry. We carefully checked and confirmed the accuracy of the data, such as company contact info and other required data. The second step was to prioritise creating a strong application for submission through the R&D Tax Incentive customer portal. We collaborated with the client to provide elaborate descriptions of the company’s R&D activities, such as timelines and costs.
Documentation is another area of concern for which proper documentation was emphasised. In support of the client’s claims of improprieties with the records, we reviewed, edited, and constructed records such as employee timesheets, project plans, and expense reports. We also stressed that such documentation must be kept for at least five years to meet possible audits by AusIndustry or ATO.
Finally, we helped the client avail of the tax offsets based on their eligible R&D expenditures on registration. With an annual turnover below $20 million, the client was eligible for a 43% refundable tax offset. Thus, we provided strategic oversight so that various claim elements fit the program well.
The R&D Tax Incentive
Small businesses with an aggregated turnover of less than AUD 20 million are eligible for a 43.5% refundable tax offset on qualifying R&D expenditures.
The company incurred AUD 150,000 in qualifying R&D expenses:
R&D Tax Offset: The company can claim 43.5% of the R&D expenditure.
AUD 150,000 × 43.5% = AUD 65,250.
Thus, the net R&D benefit for the company would be AUD 65,250 as a refundable tax offset. This amount will reduce the company’s tax liability, or if there is no liability, the company will receive the amount as a cash refund. In this case, the client had a small tax liability of $3,450, which meant the client received $61,800 as a cash refund.
Outcomes
While working collaboratively with the IT consultancy, we created a clear, compliant, and persuasive application. This submission demonstrated that it was aligned with the R&D Tax Incentive guidelines, and thus, the client was awarded an R&D tax incentive of $61,800. This funding aided the client in sustaining innovation and remaining competent in the IT industry.
What contributed to the success?
Many factors contributed to the success, such as the eligibility check, registration process with AusIndustry, compliance with the record-keeping requirements, and good observation and preparation for the application process. The credit also goes to the client, whose desire to follow our expert’s recommendations and acquire the proper knowledge of writing a successful grant proposal guarantees compliance with all the grant requirements.
Is Your IT Business Eligible for the R&D Tax Incentive?
If you belong to the same industry and want Pattens to help you with your next R&D tax incentive application, enquire now to find out how we can assist you with your next grant and how to ensure you receive the funding you need for your groundbreaking initiatives.
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