Blog

Below are updates of R&D Tax Incentive Program and the Export Market Development Grant (EMDG)

R&D Tax Incentive Program

A bill to change the rate from currently 43.5% to instead 18.5% plus the corporate tax rate from 1 July 2021 for entities with an aggregated turnover that is less than $20M and for expenditure incurred from 1 July 2021 for companies with a 30 June year end. For those that are over $20M, the rate depends on the R&D intensity (that is the percentage of R&D expenditure incurred by the company to total expenditure).

The Research and development tax incentive was amended in November to:

• Permanently increase the expenditure threshold cap to $150M;
• Link the refundable tax offset for small R&D entities to the claimant’s corporate tax rate plus 18.5%; and
• Amend the R&D offset for larger R&D entities to their level of R&D expenditure intensity.

Export Market Development Grant

Legislation was passed in December that relate to how the Export Market Development Grant (EMDG) will be administered and calculated, although detailed guidelines remaining pending. Those of you familiar with the program will be aware that historically you would apply for relevant activity that occurred in the past year. The changes reorient the EMDG to a more traditional grants scheme with upfront funding agreements for eligible exporters.

The key differences in the new program are:

1. Likely annual application window will only be 4-6 weeks. In 2021, you can continue to apply under the existing program for export activity conducted in July 2020 – June  2021 and simultaneously under the new program for proposed export activity from 1 July 2021.

2. Applicants will be broken into tiers and those tiers will determine how much funding you are eligible for:

• Tier 1: New to export – maximum $40,000 each year for two years;
• Tier 2: Expanding export promotion activity – maximum $80,000 each year for three years;
• Tier 3: Making a strategic shift – maximum $150,000 each year for three years; and
• Tier 4: Representative Bodies – maximum of $150,000 per year

3. Abolition of the export earnings test.

4. Applicants have a financial turnover of less than $20m the financial year before your application.

To determine which tier your business will fall into, you will need to use the International Readiness Indicator Tool on Austrade’s website available here.

You can also distinguish which tier your business falls into based on the following:

Tier 1: New to export

This tier will require that you demonstrate that you are ready to export through relevant training or through your understanding of what it takes to export.

Tier 2: Expanding export promotion activity

This tier will require that you demonstrate you have a plan to expand your marketing for your product and that you have already exported your product or service.

Tier 3: Making a strategic shift

This tier will require that you demonstrate you have a plan to expand your marketing for your product by making a strategic shift.

Tier 4: Representative Bodies

This tier will require that you demonstrate you have a plan to market your members products (if you are applying for funding to undertake marketing). Your plan must be for the products your members have a designated connection.

Alternatively demonstrate that you have the skills and experience to train members to become ready to export (if you are applying for funding to undertake training).

Once approved you will enter into an agreement with the government. The agreement will identify:

• What your product is;
• What the purpose of your marketing is;
• How much your grant is for; and
• (maybe) individual eligible expenses you agreed you would have.

Approved applicants will need to demonstrate that they have spent money on eligible expenses to support their export plans. The agreement will set out when you get the money. Austrade may ask for information in relation to expenditure to support the milestone payments. Prime is available to discuss this new process.

For any enquiries or support:

Melbourne team

Brisbane team

This post is provided by Prime Accounting and Business Advisory Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. This post is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this post. All information is subject to change without notice. We and each party providing material displayed in this post disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of information or material in this post. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.