The manufacturing sector is one of the largest and most profitable industries in Australia.
Spanning everything from food and beverage, tobacco, textiles and therapeutic goods to chemicals, machinery, metals and plastics, Australian manufacturing is responsible for producing so much of the products we use for work and leisure every day.
Unfortunately, globalisation of manufacturing has made it harder for businesses to retain viability and preserve competitiveness in such a saturated market. To overcome this, many manufacturing operations are turning to research and development to help deliver better processes and products to their customers.
What is the Research & Development (R&D) Tax Incentive?
The R&D Tax Incentive is a tax offset (refundable, depending on turnover and tax liabilities) for eligible businesses that are generating new knowledge through research and development. Through producing this knowledge, companies would be looking to advance things like product function and performance or efficiency and effectiveness of industry and manufacturing processes.
What are eligible R&D activities in Manufacturing?
Some of the key points that determine eligibility within the manufacturing industry include:
- Must improve a product or process in a significant technical way
- Must be new or novel – cannot be a simple product or process upgrade
- Must aim to eliminate uncertainty through research
- Must use a process of experimentation based on principles of established science
To be eligible for the grant, your business will need to keep detailed records of all research and development activities. You’ll also need to demonstrate your experimentation and how each part of your research fits into the category of Core or Supporting R&D activities.
It’s also good to note that failed experiments may still qualify for the R&D Tax Incentive. By demonstrating the ways something doesn’t work, you’re still contributing to new knowledge. It may be knowledge of how not do to something, but oftentimes AusIndustry and the ATO will still consider it as a knowledge contribution.
To give you an idea of the sorts of activities that might fall under core activities in your industry, have a read of the following points:
- Designing and developing new strategies for manufacturing production, particularly those that are safer, more effective or more efficient
- Improving traditional processes in a new and innovative manner
- Enhancing output through specialised equipment, processes or additives
- Developing new technologies to enhance manufacturing industry processes
- Implementation of automation to enhance productivity
Throughout the experimentation process, there would be a number of secondary activities and associated expenses that are required to carry out your research. These would be your supporting activities and may include some of the following:
- Salaries or wages paid to key researchers, developers and assistants
- Contractor / Consultant costs (mainly technical/scientific)
- Equipment required to carry out the research or to build a prototype
- Cost of engaging the services of a research facility, rent or utility bills
Because the industry is vast, we’d be here for weeks listing out all eligible activities within the manufacturing process. So, if you’re still unsure whether your activities would be eligible for the R&D incentive, click here to find out more.
What activities are not eligible under the R&D Tax Incentive for Manufacturing?
To help you get a better understanding of what is and isn’t eligible, have a read of this list of excluded activities from your industry.
These activities do not relate to novel or innovative knowledge or don’t directly relate to the development of products or processes.
- Market-related research, testing or development
- Management studies or efficiency surveys
- Testing and modification of existing production lines
- Development that doesn’t relate to functionality
- Commercial, legal and administrative aspects of patenting, licensing or other activities
- Research funded by a third party
Maximising your R&D claims with Clearpoint Ventures
Manufacturing in Australia is a rapidly expanding industry for both domestic and international consumers. As such a fast-paced environment, having the capacity and resources to consistently track activities and develop a knock-out application at the end of the financial year can be a bit of a stretch.
At Clearpoint Ventures we help businesses just like yours to manage, track and report on your R&D Tax activities to make sure everything is ready to go at tax time. We also work with you to manage expenses, streamline workflows and ultimately increase your cash refund.
Using our expertise in reporting and advice, Clearpoint Ventures allows you to maintain complete clarity of budgets, track monthly progress and have personal check-ins to make sure you’re setting yourself up in the best way possible.
If you’re already conducting innovative industry research or planning to get involved with R&D in manufacturing, you’d be crazy not to claim the R&D Tax Incentive.
Click here to get the ball rolling for your application.