Constant innovation is a requirement in almost every business. Companies that fail to innovate are often left behind or lose their once prized market leadership positions. Given this basic imperative, it is staggering that Australia spends only 1.8% of its GDP on research and development activities. By stark contrast, the USA spends approximately 2.8% of its GDP (about 40% of total global spending) on R&D, and, in doing so, produces 70% of the world’s Nobel Prize winners.
To encourage meaningful spending on R&D, the Australian government offers tax incentives for certain R&D activities. Eligible activities generally include those that are innovative or technically risky, are scientifically based and are intended to gain new knowledge and/or improve products, processes or services.
Companies can claim eligible activities as tax deductions, and an uplift can be applied to many eligible costs, creating a further incentive. In addition, some smaller companies can claim their R&D related deductions as a cash payment from the government. There are clearly substantial tax benefits to be gained from engaging in R&D.
Businesses from industries as diverse as biotechnology, food service and electricity retailing have all received tax benefits – and these aren’t limited to large companies. Small IT startups and businesses in many other sectors have benefited from these arrangements.
The sad fact is that many Australian organisations fail to capitalise on this opportunity to boost innovation, capture a strong market position and, at the same time, feed their bottom line.
Is your company one of them?
Ayush Trivedi
DC Strategy -
franchise advisory7-Aug-2008