Posted By: R&D SmartTax

Ok, so you are the sole person engaged in your business. You are just starting out on an idea you’ve always wanted to try. So there is no income, no profit, no money yet on the horizon. Surely you are too small to claim R&D tax benefits?

The answer here is a resounding NO, you are not too small to claim. In fact you are perfect. Exactly who the government hopes to target with these programs.

The whole idea behind the R&D tax breaks is that they are an incentive to encourage Australians to take more risks with regards to creating innovative new technologies. And there is nothing more risky than a start-up. A brand new business with nothing more than some great intellectual capital to get it going.

It is expected that you will have no income in these early days or early years. And it is perfectly understandable that you are not yet profitable. These things take time. That is the nature of the start-up company. But everyone had to start somewhere, even the likes of Professor Ian Frazer, Cochlear or BHP.

And this is where the R&D tax breaks slot into the picture. To offset the risks that you are taking, the government has agreed to pitch in a little, well, actually a lot, to help get you off the ground.  Instead of providing you with just a rather useless tax concession – after all who needs to reduce tax payable when you have no income – the government has decided that what small start-ups needs is cash. Cold hard cash and plenty of it. Infinitely more useful for paying the bills.

And that’s what the R&D Tax Offset does. It takes your tax loss and converts it into a cheque for the equivalent amount of your R&D expenditure x 125%.  This means that the greater your tax loss, the greater your R&D cheque, provided you have spent the same on R&D during the year.

As a small start up you probably have paid scant regard to matters such as your company tax return. After all, there’s not a lot to show in it income-wise.  But provided you have spent at least $20,000 on R&D during the financial year, then you are perfectly eligible to claim your R&D tax cheque at tax time.

So at tax time this year, make sure you talk to your accountant about making an R&D tax claim. Don’t listen to them if they tell you that you are too small, and follow our easy Four Step system to making your claim.  For a minimum $7,500 cheque it could be just the thing you need to keep afloat as a start up and take your business to the next level.

We look forward to seeing your business make it when it does.

About R&DSmartTax

R&D SmartTax tools were born out of a desire to help the many smart small Australian companies access the R&D Tax Break benefits without the need for hours spent reading tax literature or expensive consultant fees. The R&D Eligibility Wizard is designed to be low cost, easy to use and available for all Australian industries.


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A. Blauensteiner
Australian Institute of Commercialisation

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