A guide to government grants and incentives

The concept of free money sounds too good to be true, but government grants and incentives for businesses are just that. My Business explores various options open for SMEs to enjoy a helping hand from the government to boost their operations.

Managing cash flow is often a difficult task for any SME. One way to go about it is through government grants and entitlements.

Last financial year, the federal government gave out more than $287 million in grant assistance to growing SMEs. Add to that a further $131 million under the Export Market Development Grant, as well as a multitude of grants, incentives, tax offsets and assistance provided by the ATO, state and territory governments, local councils, business chambers, industry bodies and so forth, and it’s clear that there is plenty of money doing the rounds to support small and medium-sized businesses.

How you can get your hands on a share of this cash will depend on a number of factors, including the size and nature of your business, your financial position, staff numbers and geographic location.

So let’s clear up a few myths and misconceptions about some of the main types of government incentives, and whether your business could access these funds.

Granting businesses additional cash flow

“These grants are helping to enable growth and productivity for globally competitive industries, growing business investment and improving business capability in businesses of all sectors and sizes.”

The first port of call for any business owner interested in locating grants from the Australian government should be the government itself. Business.gov.au, an arm of the Department of Industry, Innovation and Science, hosts a wealth of information to aid potential, existing and exiting business owners.

On the site, business owners can search for any grant currently available through the free Grants and Assistance tool, which can then be filtered by location, business stage, status of program and specific industry.

“These grants are helping to enable growth and productivity for globally competitive industries, growing business investment and improving business capability in businesses of all sectors and sizes,” a spokesperson from the Department of Industry, Innovation and Science says.

Finding extra funds for exporting

Expanding into exporting requires extensive research to ensure your product can be adapted to suit a new market, which can be a highly expensive exercise. The Export Market Development Grant (EMDG) is a viable option to ease the financial burden of this process.

One hand passing money to another handAdministered by Austrade, the EMDG allows business owners to apply for a grant based on half of the business’ total eligible expenses relating to exporting, less a $5,000 non-reimbursable fee. The actual amount available for the grant ranges from $5,000 to $150,000.

“The EMDG scheme has, for more than 40 years, been bringing benefits to Australia by assisting businesses in expanding their operations to overseas markets, and continues to be an effective government initiative in the area of Australian exports,” says Steven Ciobo, Minister for Trade, Tourism and Investment.

The R&D Tax Incentive

While grants can offer businesses additional cash flow, it is important to remember that competition for grants can be fierce; businesses may be vying for a share of a limited pool of funds, while some grants only have one beneficiary, with multiple businesses competing for the prize.

Entitlements, however, can be available to any and all businesses that apply.

One such entitlement is the R&D Tax Incentive. This incentive is available to businesses undertaking research and development (R&D) activities, and have at least $20,000 of potential deductions in the financial year.

The incentive offers a 43.3 per cent refundable tax offset on aggregated turnover below $20 million, or 38.5 per cent for over $20 million.

In order to claim the R&D Tax Incentive, you must first determine what kind of R&D activity is taking place. The Department of Industry, Innovation and Science separates R&D activities into two categories: core and supporting activities.

Core R&D activities are viewed as “something that hasn’t been done before and cannot be done without experimenting”. This could be a new product, process or service, or a unique adaptation to an existing one.

On the other hand, supporting R&D activity refers to a traditional method of supporting a new concept. For example, this could be manufacturing, testing or marketing the result of the core R&D activity.

Once you have determined the type of R&D activity, the application process requires the keeping of two kinds of records: activity and expenditure.

Activity-based record keeping contains any information about the R&D activities taking place, such as any plans, meeting notes and background research.

Expenditure-based record keeping, as the name implies, is the collation of any costs incurred while performing the R&D activities, including timesheets, ledgers, financial documents and invoices.

With all this information in hand, business owners can then apply for the R&D Tax Incentive.

Overcoming the time barrier

A piggy bank looking at a clockGetting financial assistance from the government is fine in theory, but in practice, many businesses struggle with the time it takes to put an application together. However, there are means of overcoming this.

In many instances, you may not need to complete the application yourself – there are firms that assist in such matters, such as PwC and its Niftyforms arm.

A business owner can outsource the task, provide the necessary information, and the application will be completed against the submission criteria on your behalf.

“We've got a network who reviews it nationally, and one of the reviewers will work with the applicant to finalise the form, resolve any outstanding issues, and then submit that to the authorities,” says Anna Perejma, senior manager for innovation and incentives at PwC Australia who helps business owners apply for grants and entitlements.

In regard to the R&D Tax Incentive, business owners can expect to see similar returns as if they made a claim by themselves, less a predetermined fee for service.

Who should be applying for grants and entitlements?

Applying for grants and entitlements is something that any business should be taking advantage of.

There is, however, something of a stigma surrounding these government funds: that only desperate businesses need grants and entitlements.

The connotation of the ‘government handout’ is a dangerous belief to have, as it cuts out business owners from extra funding to spearhead growth and create more jobs.

The truth is, in most instances, the exact opposite – applicants need to demonstrate growth forecasts and current resources to be able to qualify.

PwC's Anna says government assistance is designed to support all businesses, regardless of current economic status.

“Every SME, every start-up, every multinational, should be claiming [entitlements], because they are entitled to that money,” she says.

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