• 27/01/2023
  • Posted by: Darren Lelliott
  • Category: Tax Incentive Program
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Federal Tax Incentivised SME Investment Programs

In the last article I spoke about the nature and background of the available SME tax incentivised investment schemes.  This article address the R&D Tax Incentive Scheme.

R&D Tax Incentive Scheme;
Personal Direct Investment Incentives
The Venture Capital Program
Matrix of Programs
Optimised Incentive: Self-Managed VC Funds

R&D Tax Incentive Scheme

Although the R&DTI scheme is for incentivising the investment by the venture into further research and development, it is necessary to overview this scheme because a venture’s ability to tap into the R&DTI may be crucial to the cashflow in that venture, and therefore of great significance to investors.

We have also found that common misperceptions of the use and benefit of the R&DTI scheme often confuses investors.

Furthermore, there are traps within the R&DTI scheme structure that many ventures and their advisers are not aware of until they fall into them.  Andrew Rettie, a partner at Purpose Driven Capital,  sites an example of an investment company having been trapped by its own success and then was constrained from paying dividends to investors until such time as R&DTI credits were paid to the ATO.

 Business – turnover under $20M  Business – turnover over $20M ESVCLP 
Application to register with AusIndustry Yes Yes No 
Research Service Provider Costs to support    
Eligible activity criteria Yes Yes Yes – investments 
Plan and rational including methodology submitted –  R&D activities must follow a systematic progression of work from hypothesis through to experiment, observation, evaluation and logical conclusions Yes  Best supported by engaging an approved Research Service Provider  Yes   Best supported by engaging an approved Research Service Provider No 
Carried out in scientific way – proved by records Yes Yes No 
Annual reporting in tax return Detailed breakdown of expenses  Yes  Yes Yes  Yes Yes   No  
Outcome is not known in advance Requirement Requirement Requirement 
Benefit    Minimum spend is $ 20,000 to be eligible for offset   Maximum eligible expenditure is $ 150,000 If more only usual corporate tax rate applies – no benefit Tax offset on eligible expenses @ corporate tax rate + premium of 18.5%    Cash benefit  Ta x offset on eligible expenses @ corporate tax rate – 2 tiesr:  For eligible expenses up to 2% of total expenses a premium of 8.5% For eligible expenses over 2% of total expenses a premium of 16.5% Tax credits  Corporate tax rate 25% for aggregate turnover of less than $50M Corporate tax rate 25% for aggregate turnover of more than $50M Minimum spend is $ 20,000 to be eligible for offset Tax free distribution of net income  
Impact on franking   Franking debit arises from scheme  Franking debit arises from scheme Not Applicable 


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