www.pwc.com.au

May 2015

Cash Opportunities for R&D Rewarding your Innovation & Enhancing your Profitability Daniel Knox Director – R&D Incentives Imelda Alexopoulos Director – R&D Incentives

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R&D Tax Incentive – Background to the program

Federal Government’s largest program to incentivise R&D - $1.7b spend p.a. 1

The tax offset program is deliberately broad-based 2

Applies to a wide range of companies – you don’t even need to own a Bunsen burner 3

‘Entitlement basis – not a competitive process 4

Retrospective application process (up to 10 months after financial year end) – you can receive a benefit for activities you have already conducted (activities from 1 July 2014 still up for grabs). 5

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Eligibility

Must be in a company (not a trust, partnership, sole traders)

Must have undertaken eligible R&D activities

Minimum of $20,000 in eligible expenditure

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The two core components of the R&D incentive are:

Grouped Turnover test

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The benefit of the New R&D Tax Incentive

45

55

45% offset

30

10 60

40% offset

<$20m <$20m

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Example - <$20m Turnover

Eligible R&D Spend $500,000

45% Refundable Tax Offset $225,000

Potential max Tax Refund $225,000

R&D Tax Incentive – An example: $250K project

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Example - >$20m Turnover

Eligible R&D Spend $500,000

40% Refundable Tax Offset $200,000

Reduction in tax payable (40%-30% corp tax rate) $50,000

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How do I tell if I am undertaking eligible R&D?

Are you developing something new? (this can be a new product, a new process, or service)

Are you solving a problem or overcoming a technical challenge?

Is there a gap between what is currently known and understood about this product/process/problem and the solution?

Will testing or trialling be required to determine or develop the solution?

Are you trying to achieve or extend industry best practice?

Is the outcome of the R&D unknown when you started? 6

What are ‘R&D activities’ and where to find them

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• Developing and trialling new varieties of fruit

• Development of new processing techniques for fruit

• Growing trials of fruit in atypical regions

• Applying new technology or off-the-shelf technology from different industries / different applications in a new way

• Developing new methods to combat weeds / pests

• Developing new methods to package and transport products

• Develop new methods to modify the behaviour of your crop i.e. flowering, ripening, spoiling, increase or change timing of yield

• Development of new value added products

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Examples of ‘R&D activities’ in horticulture

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What types of costs can be claimed for R&D? • Salaries and on-costs

• Contractors / Consultants

• Direct costs (e.g. materials, travel, etc)

• Trial crops / plantings and associated maintenance

• Reasonable portion of overheads

• Depreciation of assets

• Full cost of intangible assets (e.g. software)

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R&D Expenditure

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Horticulture Innovation Australia (HIA)

Levies • Should you be claiming the R&D portion of your HIA levies

Co-funded projects • You should be claiming the cost of participating in HIA projects

(where those costs are not reimbursed)

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How can PwC help?

• Our national R&D team currently serves over 1000 clients in a wide range of industries, ranging from small, family-owned businesses to ASX 200 companies

• Our fees are capped, to ensure you always receive a benefit from the process

• We work with your existing tax accountant in preparing the claim documentation

• No claim = no fee

• Presence in SE Qld, Nth Qld & Northern Territory

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Other opportunities

• AusIndustry reviews • Export Market Development Grants

• Grants (Entreprenuers’ Infrastructure Programme)

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Contact

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Daniel Knox Director, PwC Brisbane 07 3257 8773 daniel.knox@au.pwc.com

Imelda Alexopoulos Director, PwC Northern Australia 07 4721 8536 imelda.alexopoulos@au.pwc.com

www.pwc.com.au

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