[cba9]

http://www.businessinsider.com.au/the-australian-who-may-hav...

"Under the scheme, a company which turns over less than $20 million is eligible to apply for a cash rebate of 45 cents for every dollar spent on research and development activity.

According to a press release in May, 2015, DeMorgan Ltd succeeded in its application for the rebate.

That means DeMorgan were able to prove to AusIndustry that it had spent $120 million on R&D activities in the 2014/2015 financial year, all while turning over less than $20 million. A 45 cent rebate on $120 million works out to $54 million."

[Innercode]

I'm a consultant in the R&D Tax space. The press release relates to an advanced finding, which is an advanced approval of R&D activities. It does not however guarantee approval for the amount of expenditure they would be claiming. A tax refund of that size would naturally attract the attention of the Australian Tax Office(ATO). The press release is also dated before they could submit their tax return to obtain a 14/15 refund. A key problem with the press release is that there is now a $100million cap on how much expenditure they can claim in a financial year, so theoretically their maximum benefit would be $45million.

$120million in software R&D is a very large spend in Australia for one year, Google Australia for example claims about $40-$50million in R&D spend each year. Atlassian and some of the larger banks would claim a similar amount. I have not heard much about DeMorgan before, however if it all checks out they would be one of the most significant powers in the Australian tech space.

[robzyb]

Fellow Australian here (albeit currently living in Tokyo).

The "We create tax refunds" part of your homepage says that a company can get a tax refund even if there is no sales.

Does this mean that if I establish a company tomorrow, invest $100k of capital, and spent $100k of capital on R&D, then the ATO will give my company $45k?

[Innercode]

The R&D Tax Incentive was designed to give a cash benefit for startups who have little tax to pay. So your example is correct for a pre revenue entity, assuming no outstanding tax liabilities. Its an entitlement scheme, so as long as your doing R&D, have a company and spending your money through the company, you will get the benefit of the scheme.

It is one area that Australia has a significant advantage over the US for startups.

[ps4fanboy]

Yes, you have to spend the money though so youll still be down 55K, it doesnt count to things like capital purchases.

[gordjw]

Depends who owns the company you spend the $100k with.

They'd need to pay 30% tax on their income, leaving a net outlay by the government of $15k (15%) overall.

[robzyb]

Their income would be less than the $100k. They would have incurred expenses when they provided the services.

I paid $100k, the provider took the $100k and spent $60k. This means they declare $40k income.

The company pays $12k tax.

The Goverment gives $55k to my hypothetical company.

[flashman]

Andrew or David? We've done some work with you before (Vector 5).

[Innercode]

Still working for Vector 5!

Cheers, Andrew

[mikeyouse]

I've been through the ATO R&D tax rebate process with a business that had Australian operations, you need audited financials and it takes months of due diligence. As an example, we applied to the ATO with preliminary totals for our 2014 R&D spending in January of 2015, updated our application in March with our audited numbers, answered questions from the ATO for 3 months, had our application approved in June, and the check wasn't cut until September or October.

The credit from the ATO comes in the form of a check, but it's a prepayment against future tax obligations (you lost the tax-loss carry-forward you'd otherwise be able to claim to offset future profits). It's very useful for a startup since it's non-dilutive funding which can be used to get a lot of work done.

[cba9]

So it's difficult to successfully get it, and there's a lot that could go wrong and, say, prompt a lawsuit or criminal case?

[mikeyouse]

Yep, there are all sorts of forms about material representations and liabilities for false statements. It seems like a well-run program, our contacts with the ATO were very sharp and knew which questions to ask. You could tell they've ferreted out fraudulent applications before.

[kiba]

Sounds like something most companies won't touch with a nine foot pole.

[mikeyouse]

If you're honest, it's a great source of money. Our company was doing actual research to the tune of $50M spent in Australia (which was all VC money) so we got back something like $20M in non-dilutive additional financing. That $20M was "free" to us (but we lost out on the ability to write off $50M of losses against our future profits). It encouraged us to spend much more on research which mostly came in the form of salaries for Austrian employees. As long as you're not in the habit of lying to tax authorities, I don't know why every startup wouldn't take advantage.

[girvo]

They do, but hire big accounting firms to do so. This was my mother's job at KPMG, and where I work is going through the process at the moment.

[mikeyouse]

Yep, we had Deloitte AU helping with ours.