SMEs ignoring potential goldmine in R&D grants: What you need to know

Small and medium businesses might be missing out on hundreds of thousands of dollars available in research and development grants simply because they don’t know their current activities qualify for support, an expert has warned.

Nicola Purser, BDO research and development partner, says the recent changes to R&D laws may have also caused some confusion among businesses about what they can and cannot apply for.

“I think some people just aren’t aware of what the definition of research and development is,” Purser told SmartCompany this morning.

“So there are a lot of companies out there that just don’t know whether or not they can apply, but they are already eligible.”

“Even yesterday, I came across an engineering company that had never claimed R&D, and yet every single thing they do would qualify.”

While the R&D legislation changed earlier this year, the program still rewards companies for undertaking the creation of new knowledge or improvements in a variety of ways.

Purser points out that activities including developing new or improved products, even incremental improvements, can serve as research and development. And for businesses under $20 million, the grant provides them with a 45% refundable tax offset.

One of the other big issues is that the application process is harder under the new rules. Purser says this shouldn’t deter potential applicants.

“You need to separate core activity as opposed to supporting activities. From a reporting perspective, that’s a little more difficult.”

However, many companies have tried and succeed. Recently SmartCompany spoke with a company that has managed to win several research and development grants – you can read about that experience here.

Purser says the key is documentation. Businesses need to be sure they have all the necessary materials in place before they apply for grants.

Some necessary preparation includes collecting documentation to support your R&D claims, which include details like goals, activity outcomes, and any other related activity. You also need to make sure you submit in plain English, so that someone outside your industry can understand what you’re doing.

And one important point – you need to make sure you register with AusIndustry before you even apply. “That’s a big change,” Purser warns.

You can also apply for an advance finding, to determine if you’re eligible or not. They need to be submitted in the year of income in which the activities are undertaken.

But most of all, Purser says, there needs to be an awareness among companies of what the grants do. Otherwise, they’ll never apply.

“The understanding of the law has changed, and the way the information has been presented has changed. Companies just need to be aware.”