Whether you are seeking tax incentives to fast track your research and development (R&D) or looking to provide investment capital for someone else’s innovation development, there are options available.
As always, there is a balancing of risk and reward when you invest in innovation and often the decision comes down to the numbers. The below tax incentives look at either side of this innovation investment decision and how this investment can work best for you.
(i) Tax Incentives for early stage investors
From 1 July 2016, if you invest in a qualifying early stage innovation company (ESIC), you may be eligible for tax incentives. Furthermore, eligible investors who purchase new shares in an ESIC are provided with:
• a non-refundable carry forward tax offset equal to 20% of the amount paid for their qualifying investments. This is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined for their investments in each income year; and
• a modified capital gains tax (CGT) treatment, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than ten years are exempt from CGT. Capital losses on shares held less than ten years must be disregarded.
The maximum tax offset cap of $200,000 does not limit the shares that qualify for the modified CGT treatment.
(ii) R&D Tax Incentive (for eligible R&D entities)
The R&D Tax Incentive is a self-assessment program designed to encourage industry to conduct research and development. The program provides a tax incentive to industry to conduct experimental activities, in a scientific way, for the purpose of generating new knowledge.
Depending on your aggregated turnover of the business, eligible R&D entities incurring eligible expenditure on core and supporting R&D activities can claim a tax offset as follows:
• a 45% refundable tax offset where your turnover is less than $20 million; or
• a 40% non-refundable tax offset where your turnover is $20 million or over.
We understand that your investment in innovation can be both labour and dollar intensive to the business. Watermark’s experienced R&D tax incentive advisors will work with you to ensure you have the right processes in place to capture, evidence and claim your full entitlement to your eligible R&D activities.
Whilst registration to the R&D Tax Incentive is within 10 months of your financial year end, talk to Watermark Advisory Services now and discuss options for the timing of your R&D claim lodgment, of which in turn, may free up much needed cash flow within the business.
We look forward to working closely with you in providing a LINK between your business and the available tax benefits afforded through investing in innovation.
Please feel free to contact us for a no obligation discussion.