Defence SMEs and the R&D Tax Incentive
Australian Defence SMEs - do you qualify for R&D Tax concession?
Small to Medium Enterprises (SMEs) are key to Australia’s Defence industry capability.
The Australian Defence Industry landscape consists of 7 Australian Prime contractors - all foreign owned - and about 3,000 SMEs that are at the heart of Australia’s true Defence Industry capability.
In the past, there has always been significant political pressure for Australian industry content in all projects. The lack of any overt external threat to Australia and its interests has allowed this political pressure.
The current and prospective strategic threat to Australia and its interests will mean that there will be pressure to purchase capability off the shelf offshore: however, counterbalancing that will be the imperative to ensure that Australia is not vulnerable to threats to our overseas supply chain.
For any projects that involve Australian production there will always be an essential requirement for Australian industry involvement. Further, the Australian Defence Force (ADF) operational requirements are unique, necessitating leading-edge technology at a mature Technical Readiness Level (TRL). To achieve this, Australian industry will need to invest in R&D.
ITG has extensive experience working with Primes and SMEs in the Australian Defence Industry to identify R&D activities eligible for the Tax Concession.
The technical criteria determining eligibility lies in the development of new knowledge. A key part of this development must involve testing or experimentation to prove the new knowledge.
The other overarching criteria is that the Company making the claim must:
Bear financial risk
Have effective ownership of Foreground IP
Must conduct the R&D
If the Prime or SME is using PV to fund the R&D, then these criteria are clearly met.
Also consider, if the Prime or SME are in a contractual arrangement for a program of activities. Further investigation of this relationship needs to be conducted to determine which party is eligible to claim. Questions that will help this determination include:
Where are the parties located? Australia or Overseas?
What is the subcontracted party contracted to do?
What are the IP arrangements? What are the T&C’s for Background and Foreground IP? Are there any restrictions on the use of Foreground IP?
What are the T&C’s for payment of the subcontractor?
If you have a project you’d like to discuss, call Susan at International Technology Group (ITG) on 0403 601 005 for a free consultation.