Australia is home to beautifully crafted food and beverage products, many having taken years of recipe formulation, development and testing to reach the exact taste required for such unique produce.
We are renowned for regions dedicated to wineries, cheesemakers, craft gin or whiskey, and there are also many innovative products specifically created for the sober-curious or dietary restricted, which have taken years of time and research to bring to the shelf.
Many of these products would have graced Christmas tables around the nation - but how does this impact the annual business cycle? And why is it important to keep the deadline of April 30 in mind?
Come January, people have been out of the office for some time, invoices are owing, and sales have slowed. Cashflow becomes a critical issue in this first quarter.
As you look to your finance team to ease economic pressures, it is worth asking whether your company is eligible to claim the R&D tax incentive or other grant funding to boost cashflow.
R&D tax incentive
If your business spends time and resources developing new or improved products which require trialling and testing to reach desired product outcomes, it may be eligible for the R&D tax incentive.
This incentive is an annual and potentially refundable tax credit designed to encourage Australian businesses to undertake R&D activities.
For eligible companies, the R&D Tax Incentive program comprises two-tiers:
- For companies with aggregated turnover of less than AU$20 million, a refundable tax credit of 18.5% above the company tax rate (providing a refund of up to 48.5% depending on tax losses available);
- For larger companies (AU$20million+ aggregated turnover), a non-refundable tax credit of between 8.5% and 16.5% of eligible costs based on a company’s R&D intensity.
Put simply, for a company which spends $500,000 a year on eligible R&D activities in Australia, there is an R&D cash benefit of between $42,500 and $242,500 depending on your size and tax position.
The R&D Tax Incentive program is a broad-based, self-assessment program jointly administered by the ATO and AusIndustry.
Companies have up to 10 months post financial year end to make a claim, thus potential R&D claimants have until 30 April 2024 to lodge an R&D Application for the financial year ended 30 June 2023.
The financial benefits are accessed via the company’s Income Tax Return.
Eligible R&D activities can range from development of new plant-based or cultivated meat products, developing or trialling new or previously unproven ingredients, producing new beverage products, through to implementing green technologies or new manufacturing processes through automation and robotics.
RSM Australia is assisting many within the sector in identifying eligible R&D activities and associated costs, as well as advising on documentation requirements and governance processes to support them through the annual R&D claim process.
Grant funding is another cash boost option
Late 2023 saw a raft of State Governments grants for manufacturers via programs such as the Victorian Manufacturing Growth Program and Made in Queensland, with a few such as the Value-Add Investment Grants in WA that are specific to the Food & Beverage sector.
In the private sector, Coles drives innovation and delivers sustainability outcomes through its Nurture Fund.
Funding programs are reviewed annually in line with government budgeting cycles, resulting in a constantly evolving funding landscape.
RSM work alongside our clients to plan their future investments and leverage all potential funding avenues to help identify where food and beverage, and other, manufacturers might be eligible for grant funding.
RSM Australia is one of Australia’s leading professional services firms. With 32 offices around the country, the company ensures clients are at the forefront of world’s best practices, technology, and innovation within a rapidly changing global economy. Jessica Olivier is partner, R&D Tax and Government Incentives, and national leader – Manufacturing Services.
