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R&D Illustrative Case Studies

By In R&D Tax Benefits On July 26, 2011


Case Study 1 – Jobbing Shop (Job Shop) with turnover greater than $20 million

Job Shop tenders for job lots of, say, fifty units for the major telecommunications companies in Australia.

Until we met with the company it had not received the R&D Tax Benefits.  There was a general feeling within the company that this type of Government program was more trouble than it was worth and would distract staff from the core activities of the company.

We have gained access to the R&D Tax Concession program for this company for the past two financial years but they are currently receiving far less than we believe they should.  Annual R&D spend has been in the range of $400,000 to $500,000; a net benefit of between $30,000 and $37,500.

The challenge lies in the way in which the company uses its job costing and accounting system.  Prototyping and other R&D activities are costed into the job and the first unit, where new processes and materials are incorporated, carries these costs but they are not identified as R&D costs.  We are in the process of working with the company to improve its record keeping process; we believe its R&D expenditure claim should be about three times the current claim level.

Case Study 2 – Promotional Agency

Promotional Agency has been our client for five years during which time they have gained R&D Tax Offsets for the development of a web-based corporate system that gives the company and its clients the capacity to manage promotional activity.  It also gives sub-contractors the means of indicating their availability and managing their interaction with the company.

The system has been designed with the intent of providing access to other, potentially competing companies in return for license or transaction fees.

The web-based system has been designed and specified by the company but the software was written by an outside software development house.

The company retains the intellectual property in the system and is, therefore, entitled to gain access to the R&D Tax Offset program.  The software development house is not able to gain such benefits.

Promotional Agency is a trustee company and is therefore not allowed to be the applicant.  Another company (Otherco), owned by Promotional Agency, was established as the Intellectual Property owner and is the applicant.  Otherco is also marketing third party access to competing companies.  Promotional Agency has a license agreement with Otherco and pays license fees for access to the system.