Thousands eligible for tax offset, but don’t know it

Tens of thousands of small and medium businesses are missing out on a tax offset that could save them tens of thousands of dollars, says a business adviser.

“An enormous amount of money is available, but you have to know about it,” says consultant Roger Morton, who has consulted to several small and medium businesses that have claimed the offset.

He says many small and medium sized companies that invested in developing or improving new services or products in the financial year 2006-07 are entitled to recover 37.5% of their investment, but they will not because they are not aware of their entitlement.

“Our experience is that while R&D companies and corporates with R&D departments take full advantage of such opportunities, most companies spending money to develop their business have never heard of this source of funding,” says Morton.

In 2002, the Federal Government introduced the R&D Tax Offset program specifically designed to assist the cash flow of small and medium enterprises.

Morton says to qualify, a company’s developments or improvements must comply with two primary criteria:

• There must be an element of technical risk – could it have gone wrong?
• There must be an element of novelty – was this a new approach for your business?

In addition, the business must be a company (with an ACN) and have spent at least $20,000 during the financial year but less than $1 million. And turnover must have been less than $5 million.

One example of an R&D spend that attracted the offset was a stockbroking firm that spent $1 million to develop a new website that would allow clients to log in to their internal systems. It was new, risky and might not have worked.