As consumer demand for bolder flavours and more culturally diverse options skyrockets, so too does our requirement for environmentally friendly packaging and healthier ingredients. In Australia, the food and beverage industry is currently booming with opportunities to meet the growing demands of consumers.
These growing trends are driving manufacturers to critically think about how their products are designed, produced, stored, marketed and consumed in relation to the needs and wants of the consumers. To meet these changing consumer behaviours, many food and beverage manufacturers are entering a phase of innovation and are undertaking exciting R&D activities (some of which are eligible for the Australian Government’s R&D Tax Incentive).
This article provides an overview of how the R&D Tax Incentive applies to the food and beverage industry and tips on determining your eligibility for this highly beneficial government rebate.
Structuring an Eligible R&D Entity
To ensure that companies aren’t blocking their access to hundreds and thousands of dollars in funding, setting up a correct company structure is crucial. While the correct company structure isn’t a one-size-fits-all approach, an advisor can help get you and your unique company set up correctly to ensure you’re eligible to claim the R&D Tax Incentive.
An eligible R&D entity is a corporation that is incorporated under Australian Law. It is important to note the exceptions to eligible entities; these include trusts, and in some circumstances, foreign corporations.
Eligible R&D Activities
When determining the eligibility of an activity, it must fall under one of two categories:
- Core R&D Activities
- Supporting R&D Activities
Core R&D Activities
Core R&D Activities apply a systematic, experimental approach proceeding from hypothesis through to observations and logical conclusions. The activities should aim to generate new or improved materials, products, devices, processes or service.
Core R&D Activities may include:
- Improving existing processes in a new, innovative manner
- Development of recipe formation (including ingredient substitutes, shelf life, consistency of the product and the effect this has on the flavour profile)
- Design and development of safer, environmentally conscious strategies for the production of food/beverage and packaging
- Designing, developing and implementing new equipment to enhance productivity
Supporting R&D Activities
Supporting R&D Activities include activities that are directly related to core R&D activities. Although they are not part of the R&D experiment, supporting R&D activities directly underpin the experiment itself and would not have been undertaken without the Core R&D Activities occurring first.
Supporting R&D Activities may include:
- Background research into existing products and processes within the food and beverage market
- Designing initial product concepts
- Manufacturing prototypes to be tested
- Training staff to use new equipment, assemble new products, learn new processes that need to be completed before the core activity can be tested
- Project management activities
Costs to include in your R&D Tax Incentive Claim
The general rule is that expenditure on R&D activities is claimable in the income year it is incurred. Costs may include:
- Wages, super and taxes for employees and directors
- Contractor fees
- Depreciation on assets used for conducting both Core and Supporting R&D Activities
- Ingredients or packaging
- Payments made under the Cooperative Research Centres program (CRC)
- A relevant portion of the business overhead - including rent and utilities
The R&D Tax Incentive is a valuable funding avenue for many Australia food tech businesses. But there are common errors that people make, which result in applications being denied or money left on the table.
Here at BlueRock, our R&D Tax Incentive experts demystify the complex regulation and guidance to ensure you can get the most out of your R&D Tax Incentive claim. We work closely with your team to clearly identify eligible costs and activities for your project, and communicate these to AusIndustry to ensure your R&D Tax Incentive application has the best chance of success.
Speak to our very own R&D Tax Incentive experts to unlock thousands of dollars in Australian Government funding for your R&D activities.
