This may seem cliché, but Australia is an amazing place to be an SME or start-up. The place is buzzing with innovation and ambition…and it’s also overflowing with some unbelievably generous financial incentives and government grants. Poke your head out the window and you’ll find a company that could be eligible for government funding.
A fascinating paradox about government incentives is that, on the one side of the coin it's such an enticing source of funding, but on the other side most eligible companies either aren’t aware it exists or don’t know how to access it.
Could you qualify for a government grant?
Ask yourself these 3 basic questions:
1. Is your company doing something different to the competition?
2. Is your company producing something that differentiates you from the competition?
3. Are you selling to foreign markets (exporting)?
If you have answered yes to any of these, then someone should be poking their head into your window and telling you to investigate two main government incentives:
• the R&D Tax Incentive
• the Export Market Development Grant (EMDG)
…which can offer a company up to 50% back on their eligible spend.
The R&D Tax Incentive
This incentive offers up to 43.5% cash back on eligible spend (in some instances the benefit is a tax saving). There are three basic principles for the R&D Tax Incentive, which are inter-related:
1. New Knowledge
2. Experimentation
3. Uncertainty
Here are some case studies to explain:
1. New knowledge begins by locating a gap in the market.
A software company (Airport Transport Pty Ltd) noticed that there wasn’t one website where you could view all land travel options. They did an analysis of Webjet and saw that there wasn’t a similar land vehicle aggregation website. Further research into the market could not unveil anyone trying to roll out this idea in the manner they had in mind.
A gas heater manufacturer (Heat Us Pty Ltd) wanted to bring better performing gas heaters to the market. They wanted their heaters to emit lower gas emissions and to be more aesthetically pleasing. No-one else seemed to be doing this.
2. Experimentation
Airport Transport Pty Ltd hired some contractor developers to prove the MVP or prototype. Many lessons were learned along the way. Once they felt they could make their product happen they started hiring internal developers.
Heat Us Pty Ltd started tinkering and developing. There were many iterations of the product and learnings along the way. The development process is an ongoing process.
3. Uncertainty
Both Airport Transport Pty Ltd and Heat Us Pty Ltd weren’t certain at the onset that these new developments were going to succeed. They did, however, think that each would be a success, but the final products were arrived at through much experimentation.
Now we come full circle, the final products are what fill that initial gap in the market and could become commercial.
Export Market Development Grant
This grant offers up to 50% cash back on eligible expenditure. The three basic principles of the EMDG are:
1. Australian product
2. Revenue belongs to Australia
3. Marketing expenses must be recognised in Australia.
1. Australian Product
The product or service needs to be made or performed in Australia. If some of the product is made abroad, e.g. clothing made in China, it could still be an Australian product if the main team are based in Australia.
2. Revenue belongs to Australia
The revenue from items sold abroad need to flow back to the Australian entity. For the first two years of the grant, no revenue is required at all.
3. Marketing expenditure being recognised in Australia
The expenditure on marketing activities abroad needs to flow back to the Australian entity. Some of these expenses could be: Google and Facebook ads, photo shoots, overseas sales people, Australian consultants targeting overseas sales, overseas marketing trips and flights, trade fairs and conferences and free samples.
What to do next
It sounds too good to be true, but there are grant consultants who operate on a no-win, no-fee basis. They can advise you on your eligibility for a grant, and help you complete the paperwork for your application to maximise your chances of success.