WHAT IS R&D?

Research and development for software requires that as part of your development, you encounter technical challenges or difficulties that could not be easily solved with normal research. To overcome these issues or to create the functionality that you desire you undertake an “experimental process” to solve the problem. An “experimental process” in software is typically where you have tried different methods, different algorithms, different structures or techniques to solve the challenge.

The Australian Federal Government offers a tax incentive for companies undertaking research and development (R&D). We specialise in obtaining these incentives for software and technology companies and startups that are building products at the leading edge of their industry. The R&D Tax Incentive caters for companies with under $20 million in turnover with a 43.5 cent refundable tax credit for each dollar of R&D undertaken. For companies with over $20 million in turnover, a 38.5 cent non-refundable tax credit is provided. This replaces the normal tax deduction that a company typically receives for an expense, worth 27.5 to 30 cents in the dollar. Because the R&D Tax Incentive is refundable, it is especially useful for startup companies and as a safety net for mature companies in tax loss or in break-even situations. A startup with no income and $100,000 in R&D expenses will typically receive the full 43.5% as a refund, i.e. $43,500. Tax refunds are also not further taxable at the company level.