Do you want a Tax Incentive for your Company to conduct Research and Development?

Australia’s Department of Industry, Science, Energy and Resources incentivises Australian companies to invest in research and development for the betterment of their own business productivity, to drive innovation, to improve communities with employment opportunities and to increase Australia’s international competitiveness.

The Research and Development (R & D) Tax Incentive provides an opportunity to reduce the financial burden of conducting R & D.

Only companies, not individuals, may be eligible to claim the R & D tax incentive, government-offered financial support that offsets R & D expenses.

Who is eligible to apply for the R & D Tax Incentive?

To qualify, a company must meet eligibility criteria:

• Be an Australian incorporated company (under the Corporations Act 2001) or be a foreign company operating a permanent establishment in Australia.
• Be compliant with tax policies and regulations. Companies must be registered with the Australian Taxation Office (ATO).
• Conduct eligible R & D activities. Core and supporting R & D activities are experimental in nature and their outcomes cannot be known or determined in advance, but rather they must be determined through work based on scientific principles to generate new knowledge, processes, devices, products, or services.

• Incur eligible R & D expenditure, such as employment costs of R & D staff, costs related to R & D activities, costs of acquiring or constructing assets used in R & D.
• Register with AusIndustry to claim within 10 months of the end of the financial year in which R & D expenditure was incurred.

To meet the legal requirements of the programme, it is essential that complete and accurate records, showing that your company’s R & D activities are eligible, are maintained.

What is the tax offset percentage for my company?

Since 1 July 2021 the tax offset rates under this programme are dependent upon your company’s total annual revenue.

For small-to-medium companies (SMEs) with a total annual turnover of less than $20 million, the refundable offset tax rate is equal to your company’s tax rate plus a premium of 18.5 percent.

For large companies with a total annual turnover of more than $20 million, the refundable offset tax rate is equal to your company’s tax rate plus a premium calculated using incremental intensity (your company’s R & D annual expenditure as a proportion of your company’s total annual expenditure):

• For R & D expenditure up to 2 percent of total annual expenditure, a premium rate of 8.5 percent; and
• For R & D expenditure over 2 percent of total annual expenditure, a premium rate of 16.5 percent.

How to claim the R & D Tax Incentive

Once a company has determined it is eligible for the R & D Tax Incentive, approval to claim must be sought from AusIndustry. Keeping records is important for this stage when an in-depth description of your company’s R & D activities must accompany your application.

Claim applications must be lodged annually for R & D expenses incurred in the corresponding financial year. Lodgement is strictly within 10 months of the end of financial year.

Once AusIndustry approval is given, the claim will be processed through a company’s income tax return.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with R & D Tax Incentive. For more information,view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.

Long-term Value Investing – How it is suited to SMSFs

Growth stocks have outperformed value stocks in recent years, leading investors to believe that this trend might be due to reverse. Self-managed superannuation funds (SMSFs) are best suited for adjustment from pure growth investing to combined value investing.

Growth vs Value Investing

Growth stocks are companies that are expected to grow at a faster rate than the overall market, providing increases in share price appreciation and lesser or no income, whereas value stocks are companies that are undervalued when analysed, providing an opportunity for greater income against slower share price appreciation.

Investors can use value stocks to achieve growth by reinvesting income in their portfolios during the pre-retirement accumulation phase. Over the long-term, investment growth may be achieved through value investing and a solid foundation built from re-investing income can be drawn upon in the retirement phase.

Why SMSFs benefit from long-term Value Investing

Superannuation viewed as a long-term investment should only be adjusted after adequate consideration, rather than taking frivolous action in a changeable marketplace. A considered long-term investment has capital stability, a commitment to long-term investing, a relevant strategy, and a trust deed. These are generally all characteristics of an established SMSF.

To benefit from value investing, where income derived from stocks is reinvested in an investment portfolio to grow the fund, long-term stability of the capital base is crucial. During the accumulation phase, fund members receiving regular mandatory contributions from employers and avoiding withdrawals until the retirement phase will ensure the compounding effect of stock income reinvestment is realised.

SMSF members will eventually realise an investment portfolio that enables them to draw down retirement pensions equating to a financially comfortable lifestyle.

A committed investment team consisting of a SMSF’s members and advisors is important to ensure that there is a willingness to manage investments based on performance and trust to make any amendments for financial improvement. Good communication and excellent record-keeping are prerequisites for investing in a SMSF.

Every SMSF needs an investment strategy, a statement of how the trustees will invest to provide growth from diversification, will allocate asset classes, and will ensure liquidity of the fund. A SMSF trustee should regularly review their investment strategy and check that it aligns with the fund’s long-term goals and risk tolerance.

Another important part of any SMSF is its trust deed, a legal document setting out the rules for operating a SMSF, detailing the responsibilities of its trustee and the rights of its members. A trust deed along with a long-term investment strategy form the core structure of a SMSF.

Due to the flexibility of SMSFs, whereby a trustee and members can readily choose investments and evolve an investment portfolio over time, it is possible to include more value stocks and take advantage of stock income reinvestment.

A SMSF is an effective vehicle for long-term value investing with potential tax benefits and reduced tax obligations on investment income.

SMSFs require a significant amount of time and effort to manage well. It is prudent for investors to seek professional advice. YML Group has the expertise in SMSF management to assist you with long-term value investing. Start compounding your investment today!

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with your SMSF investment strategy. For more information, view our website and contact us on (02) 8383 4444 or by using our Contact Us page on our website.

Why engage a Lawyer for Advice on State Taxes and Duties?

In Australia tax agents are professional providers of federal tax-related services to individuals and businesses. The Tax Practitioners Board (TPB) registers tax agents and they operate under the Tax Agents Services Act 2009 (TASA). Tax agents are authorised to prepare and lodge tax returns, provide federal tax advice about income tax, Goods and Services Tax (GST), and fringe benefits, as well as represent clients in dealings with the Australian Taxation Office (ATO).

State (and territory) taxes and duties, such as land tax, stamp duty and payroll tax, fall under each state’s own tax system with laws and regulations governing each state’s own taxes and duties. TPB-registered tax agents are not authorised to advise on state tax issues.

Federal tax guidance sets clear boundaries for tax agents. Under the TASA, tax agents need to tread carefully around giving advice on state taxes to avoid being in breach of the prohibition of unqualified legal practice. In other words, a tax agent must be sure to not give advice that transcends in to the ‘legal advice’ arena.

Legal advice implies an analysis of documents, legislation, and case law. A tax agent giving advice where analysis is not required for a simple state tax or duty matter might not be considered legal advice, but this is why it is considered a grey area.

What can you do if your tax agent agreement – a contract between a tax agent and a taxpayer – specifically excludes state taxes?

If your tax agent is not responsible for providing advice relating to state taxes and duties, you may need to engage a legal practitioner, namely a lawyer, who can advise you on state tax matters. A lawyer is also required to be consulted when you have a document to be read to protect your rights or to be interpreted for any liability upon you, such as a sales agreement.

YML Group is a holistic Professional Service Provider

In collaboration with our YML Legal division, YML Chartered Accountants can assist you with state taxes and duties. We have qualified and experienced practitioners in both legal and accounting to ensure you get the right tax advice for best financial results.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with tax and legal advice. For more information,view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.