Government flies consultation flag for quarterly R&D rebates

Treasurer Joe Hockey this week announced how the new government intends to deal with the lapsed tax legislation initiatives introduced before the election, including changing the research and development rebate from an annual to quarterly option.

Hockey says they will seek a further consultation around the legislation that would enable start-ups to claim the research and development tax credit quarterly, rather than waiting the full year for the reimbursement from July 1, 2014.

The R&D tax credit is 45 cents for every dollar for companies investing significant capital in exploring new technologies.

Peter Braine, partner at accounting, auditing and advisory firm Pitcher Partners, told StartupSmart the mooted move to quarterly rebates was good news for cash-strapped entrepreneurs.

“It’s definitely a proposal that would benefit small to medium enterprises, and particularly start-ups from a cash flow perspective by offsetting the research and development expenditure at a time when start-ups may not have any other source of cash flow coming in,” Braine says.

Braine added Pitcher Partners welcomed the decision to consult further with relevant parties.

“More consultation on this measure is needed. We support it, but we think there are ways we can make it more accessible for people who need it the most,” Braine says.

Braine says the current reporting and requirements to access the quarterly rebate will be difficult for start-ups, especially the history test.

The history test requires start-ups seeking quarterly rebates to have applied for the R&D rebate at least once in the last five years. This would rule out new start-ups launched this or early next year until 2015.

“With the economy the way it is, anything we can do to encourage start-ups, especially those doing R&D, should be encouraged,” Braine says.