Rewards, incentives and grants for innovation and commercialisation

The importance of innovation and development to the productive economy has long been understood by economists and business leaders and is part of modern Australian industrial policy.  Supporting this policy are a range of government grants and incentives that help offset the localised costs of R&D and innovation, and incentivise businesses to develop new technology, products and solutions.

The Federal Government has two key schemes that support Innovation and R&D through to commercialisation:

  • R&D Tax Incentive - Australia’s premier support scheme that provides a generous tax offset to businesses investing in R&D and innovation to develop new products, processes and technology
  • Accelerating Commercialisation Grants - Competitive grant funding to help businesses take new ideas, products and solutions to market.

State Governments also have a wide range of schemes to support innovation, as well as other business support such as assisting businesses to hire new workers. 

The R&D Tax Incentive is a tax benefit available to any business that meets the requirements, there are, however, strict compliance requirements and ATO audits do occur.

Grants can be a useful source of funding but they have several challenges associated with them:

  • The applications often require significant detail and painstaking work;
  • They are often competitive and highly contested. That is, there is no guarantee of success and outcomes may depend on the quality of competing applications;
  • Funding may need to be matched by the business owner or a third-party investor;
  • IP and ownership may be shared with the government and/or possibly require formal protection as part of the process;
  • Any amounts received will generally be taxable (even if directed to capital expenditure);
  • Grant funding that relates to expenditure eligible for the R&D Tax Incentive will result in a clawback amount that negates the R&D Tax Incentive. Clawback may apply to include the matched funding the business is required to spend with the grant funding, further deteriorating the value of the grant.

On balance, any decision to embark upon an innovation grant application or a R&D Tax Incentive claim should be made thoughtfully having regard to the time and effort and cost/risk associated with the process.

Feel free to call Andrew Morgan on (07) 4052 0800 to discuss how this may impact your business.