Could your company be eligible for a sizeable R&D tax incentive claim?

Could your company be eligible for a sizeable R&D tax incentive claim?

Engineering locally made, high-quality audiovisual and storage equipment has been ‘business as usual’ for Wilson & Gilkes for more than five decades. To discover that the business qualified for the Research & Development (R&D) Tax Incentive was a pleasant surprise, one which means they can continue to invest even more in improving their specialised designs. By Dr Rita Choueiri.

Like many sheet metal manufacturers, Wilson & Gilkes provides custom-designed solutions for applications as well as off-the-shelf products under their brand names Bosco, Boscotek, Lectrum, Gilkon and Argent. Improving their products to be stronger, safer and more efficient is an ongoing process in their business practice, so it’s easy to overlook as R&D because it’s simply second nature in innovative businesses like theirs.

In conversations regarding its product development program, the company’s accountant and advisor William Buck identified the potential for an R&D Tax Incentive claim. Ian Wilson, Director of Wilson & Gilkes, contacted William Buck, which assessed the company’s business processes and projects and found it met the eligibility criteria of the R&D Tax Incentive program, enabling them to receive a sizeable R&D claim.
So what constitutes R&D? And how would you know if you are carrying out R&D?

Simplistically, an eligible R&D activity is an activity that requires experimentation to solve a technical challenge and to generate new knowledge. Possible indicators of R&D activities include:
  • Developing new or improving existing products.
  • Developing or improving processes (e.g. to improve efficiencies or energy output, remove bottlenecks, etc.).
  • Using plant or equipment in a new way other than how it’s intended to be used.
  • Developing new or improved IT systems or software, requiring – for example – the development of complex and unknown algorithms. Systems or software may be operational (for example to control or aid manufacturing or logistics processes or equipment) or customer-facing (for sales and ordering, or a software solution of any type that is saleable/licensed).

The pub test to determine if an eligible R&D activity has occurred is to answer yes to all the questions below:
  • Did you overcome a technical challenge when developing products, process or software?
  • Did you need to conduct a trial or experiment to investigate an outcome?
  • Were you uncertain that the trial or experiment would produce your intended outcome?
  • Did the R&D activity create new knowledge?

If existing knowledge was utilised to develop a new product or no true technical challenges existed (i.e. designers were confident in the new design and were certain it would work without the need for testing) then those products would be excluded from the R&D claim.

Some examples of eligible R&D activities undertaken by Wilson & Gilkes included the design and development of:
  • Storage cabinets with manganese plating lining the locking mechanism, allowing for greater security.
  • A knockdown enclosure with shelves capable of supporting large loads (where each shelf is capable of holding more than 300kg).
  • Various prototypes of new products that qualified for R&D.

Claimable expenses for R&D cover almost all aspects of carrying out R&D and can therefore add up to a considerable amount to be claimed. These may include:
  • Contractors and consultants.
  • Salaries and bonuses paid to staff plus on-costs.
  • Any relevant direct costs (tooling, travel, materials used, software/IP licences, etc.).
  • A portion of company overheads such as utilities, rent, security, cost of various consumables, or anything that has a direct nexus to the R&D activity.
  • Depreciation of tangible assets such as machinery and capital equipment used in R&D.
  • Trial costs if not captured in the categories above.

“We are always working on how we can improve our products to maintain our high standard of quality,” says Wilson. “Now we can direct more resources to our R&D program knowing that we are eligible for R&D benefits.”

William Buck’s R&D team assists in identification of eligible R&D projects, streamlining the process and maximising R&D Tax Incentive claims, so that companies can focus on developing the ideas and products and processes that Australia (and the world) needs. If you believe your business may have activities that could qualify for the R&D Tax Incentive, or if you would like to know more, then please get in contact with William Buck for a free consultation.

For R&D undertaken during the year that ended 30 June 2017, the lodgement deadline to register R&D activities with AusIndustry is 30 April 2018.

Dr Rita Choueiri is the Principal – Research & Development at William Buck. AMTIL has a service partnership with William Buck as an exclusive benefit to our members. For more information, contact AMTIL’s Corporate Services Manager Greg Chalker at gchalker@amtil.com.au.
www.wilsongilkes.com.au
www.williambuck.com