A presentation conducted for StartupSpring that outlined the three major government grants that are available to software and technology companies. It covers the R&D Tax Incentive, the Export Market Development Grant and Commercialisation Australia.

1. Federal Government Grants for Software &
Tech Companies
Presented by: Andrew Flick

2. What will we cover
• Our Case Studies
• The Research & Development
Tax Incentive
• The Export Market
Development Grant
• Commercialisation Australia

3. Our Case Studies

4. The Bootstrap
Startup
•A Fresh Startup
•Either has few financial
resources or chooses not to
use them
•Has almost all of the technical
skills within the team to
execute the vision
•Sweat Equity

5. JumpApp
Take the Leap
• A Mobile application for
Basejumpers & Skydivers
• Key Development: uses mobile
accelerometers to show live
jump distance & speed
• They have some keen founders
who are app developers and
jumpers
• They plan to live off some
savings and live frugally while
they develop this app.
Our Bootstrap Startup

6. The Funded
Startup
•Has Angel, VC or Founder
backed funding
•Brings in expertise outside of
the founders to increase the
speed or scope of the project
•Pays wages, hires contractors

7. BankBook.com
Own the World
• Social Media Website for
Bankers
• Key technological development
is a real time net worth
calculator
• They have received plenty of
Angel and Venture Capital
Funding that they are using for
development
• They plan to go global almost
instantly and are planning a
large marketing push
Our Funded Startup

8. The Established
Company
•Has previously developed a
successful product or is a
successful consultant
•Has staff, offices, overheads
•Has an existing business
structure

9. The Enterprise
Since 1974
• Have been consulting and
implementing market leading
Enterprise Resource Planning
(ERP) software for decades
• They are now creating modules
for these ERP systems that
they are selling to their
consulting customers
• They are well funded from
years of consulting
• They have a small development
team dedicated to building
solutions
Our Established Company

10. The Research and Development Tax
Incentive

11. R&D Tax Incentive
What will we cover
• Why does this grant exist?
• The benefit on offer
• What is an eligible entity?
• What is an eligible project?
• What expenses can we claim?
• Common Issues & Tips
• Questions

12. Why does the R&D Tax Incentive Exist ?
• The aim of the R&D Tax Incentive is to reward the undertaking of Research
and Development
• It is an entitlement scheme which means that a company that is eligible will
receive the benefit
• R&D is shown to increase the competitiveness of companies and the
economy
• It is a World Trade Organisation friendly scheme

13. R&D Tax Incentive Benefit
• 45% refundable tax credit for R&D Expenditure available to companies with
a combined turnover of under $20 million.
• 40% non refundable tax credit for R&D Expenditure available to companies
with a combined turnover of over $20million.
• 45% refundable, will pay down any tax first and then refund the remainder.
• Both of these credits, replace your normal tax deduction worth 30%,
however a normal tax deduction is generally not refundable. Therefore the
45% benefit is worth between 15% and 45% depending on tax position.
40% non refundable benefit is worth 10%.
• Minimum amount of expenditure claimable is $20,000.

14. R&D Benefit for our case studies
• JumpApp is under $20million in turnover, however,
because it is bootstrapping it doesn’t have any
expenditure either.
• It would seem like JumpApp can’t claim, however we’ll
address what it can do later on in the presentation.
• BankBook is a startup, it spent $500,000 on R&D with its
funding and with no income would be looking at receiving
the full 45% refundable or $225,000 as a tax refund.
• ERP is profitable company with over $20million in
turnover, with $500,000 in R&D expenditure it would
receive the 40% non refundable, worth 10% or $50,000 in
tax saving.
JumpApp
BankBook.com
The Enterprise

15. Turnover issue - Bankbook
• Whether you receive the 45% refundable credit or the
40% non refundable credit depends upon the turnover of
the entity claiming and any entities that control the
claimant entity.
• It is based on any entities that control 40% or more of the
equity or board positions.
• If two entities have more than 40% control then the entity
with the greater control will only be counted.
• If Bankbook took on a Major VC that buys over 40% of
the shareholding it could miss out on the refund.
BankBook.com

16. Turnover issue - Tips & Tricks
• Take on multiple investors instead of one
• Two investors might have 25% each rather than one at
50% so that neither have control
• Where you have multiple founders, put their equity into
a holding company so that combined they have a
greater shareholding.
• The founders holding company may have the stronger
shareholding.
• Have a separate R&D company with a no control
shareholding
BankBook.com

17. Eligible Entity
• Must be Incorporated as a Company
(ie Ltd or Pty Ltd)
• Can be a Foreign company who has a
permanent establishment in Australia
• Must bear the financial risk of the R&D
• Must own or control the resultant
Intellectual Property
• Can’t be a tax exempt entity,
companies controlled by tax exempt
entities are only eligible for the 40%
non refundable credit.

18. Eligible Research
& Development
• The aim is to create new
knowledge, processes etc.
• There must be a knowledge gap
• You must undertake an
experimental process.
• R&D Projects are formed of Core
& Supporting Activities.
• R&D can’t be claimed to create
software for internal
administration purposes only

19. Research and Development Project -
JumpApp
• JumpApp is developing a mobile application for Jumpers.
The application uses mobile accelerometers to show live
jump distance & speed
• Knowledge Gap: That knowledge on how mobile
accelerometers measure drop distance & speed is
unknown. That the suitability of different phones for this
purpose is unknown.
• Core Activities: Experimenting with different algorithms to
determine an accurate speed and distance calculation.
Experimenting with different phones and their
accelerometers to determine their suitability for the App.
• Support Activities: Planning, Non-core development,
routine bug testing, user interface design.
JumpApp

20. Research and Development Project -
BankBook
• BankBook is developing a social media website for
bankers. The key development is a real time net worth
calculator.
• Knowledge Gap: That knowledge on how to determine the
variables of the net worth calculator are unknown, that the
method for gathering that data is unknown and the
algorithms required to calculate the net worth in real time
are also unknown.
• Core Activities: Experimenting with different variables and
data available to calculate net worth. Experimenting with
different calculating methods.
• Support Activities: Planning, gathering data, creating a
test environment
BankBook.com

21. Research and Development Project - ERP
• The Enterprise is developing modules based on the ERP
software that it consults for.
• Knowledge Gap: Typical knowledge gaps are where the
ERP vendor provides inadequate information on how to
access data or data streams required for the module.
• Core Activities: Experimenting with the EPR vendors API
to determine how to access the data that the module
requires.
• Support Activities: Researching the API, developing the
module functionality, developing an interface for testing.
The Enterprise

22. R&D Expenditure
• Salary & Wages
• Contracting Costs
• Direct Expenses
• Overhead Expenditure
• Depreciation & Leasing of
Equipment
• Travel
• Associated Expenditure

23. Associated Expenditure
• Associated Expenditure rules apply to the expenditure related to people and
entities who are shareholders or directors of the entity or are related to the
shareholders or directors of the entity.
• Costs incurred to those people or entities can only be claimed with no
markup
• We can only claim that expenditure in the financial year that it is paid.
• You can choose to just have a normal tax deduction instead of claiming R&D
if the expenditure is not paid and you are on accrual for tax purposes.

24. Associated Expenditure - JumpApp
• JumpApp originally has no R&D expenditure.
• JumpApp can use Associated Expenditure to generate
R&D expenditure.
• Example below is based on 100% R&D and no other
income sources sources
JumpApp
Personal
Income
Personal
Income Tax
Refund from
Claiming R&D
$15,000 $0 $6,750
$30,000 $2,242 $13,500
$45,000 $6,171 $20,250

25. Record Keeping
Required
• Must keep development records that
evidence the activities of the R&D
Projects
• Records Examples: planning
documents, functional specifications,
architecture documentation,
Technical documentation, Source
Code comments.
• Time Keeping (ie timesheets) is also
required for each claimable
employee
• Taxation, Financial & Accounting

26. Common Issues &
Tips
• Claim each financial year, you
can lodge a claim up to 10
months after the end of the
financial year.
• Common issues include: not
having the right entity, not
having expenditure and not sure
about whether the R&D would
be eligible.
• A consultant in this area must
be a registered tax agent.

27. Questions?

28. Export Market Development Grant (EMDG)

29. EMDG
What we will cover
• Why does this grant exist?
• The benefit on offer
• What is an eligible entity?
• What expenses can we claim?
• Common Issues & Tips
• Questions

30. Why does the Export Market Development
Grant Exist?
• To promote the exporting of Australian goods, services, intellectual property
as well as tourism and events in Australia
• It focuses on rewarding marketing activities that are conducted with export in
mind.
• Like the R&D Tax Incentive it is an entitlement scheme which means that a
business that is eligible will receive the benefit

31. EMDG Benefit
• Up to 50% of your Eligible
expenses are reimbursed to you
• First $10,000 is not reimbursed
• Minimum expenses $20,000
• First Grant can cover 2 years
• EMDG Budget is limited,
• Up to 7 grants only, limited by
export sales from 3rd Grant

32. Eligible EMDG
Entities
• Individuals, partnerships,
companies trusts etc.
• Only for businesses with
$50million or less in income
• Limited to seven claims, they
limit related entities from also
claiming if they are seen to be a
continuation of the same
business.

33. Eligible Expenses
• Overseas Representatives
• Marketing Consultants
• Overseas Marketing Visits
• Communications
• Free Samples
• Trade Fairs, Seminars, in-store
promotions
• Promotional Literature &
Advertising
• Overseas Buyers
• Registration and/or insurance of
eligible intellectual property

34. Overseas Rep
• is someone who spends 12
months or more in an overseas
country to promote your
products/services
• We can claim Wages, Fees,
office expenses, motor vehicle
as well as advertising where
related to marketing
• Maximum $200,000 per
application claimable in this
category

35. Marketing
Consultant
• A marketing consultant is an
arms length contractor who
assists with marketing
• We can claim consultancy fees,
advertising expenses, fares,
accommodation and
entertainment expenses
• Maximum $50,000 in this
category

36. Overseas
Marketing Trips
• Travel by employees on behalf
of your company overseas to
market your goods/services.
• We can claim airfares (65%
only for first class), travel costs
(taxi’s etc) and an allowance of
$300 per marketing day.
• A restriction is in place for
relatives of directors and
existing employees, that they
must be employed for a full
time year before they can claim
on this section.

37. Advertising
• We can claim materials and
advertising to promote the
company’s products for export
• Can include print, television
and internet
• Includes Google Ad words &
other internet advertising
• Includes the development of
the promotional part of your
website

38. Intellectual
Property
• We can claim the costs of
registration of intellectual
property in overseas markets
• This includes Attorney &
Lawyers fees, Insurance
against infringement, filing and
renewal expenses
• Cap of $50,000 per application
in this section
• Restriction: we can’t claim the
cost of defending the IP.

39. What we can’t
claim
• Marketing costs related to
North Korea, Iran & New
Zealand
• Costs that are not
substantiated and paid for by
the claimant entity
• Costs not related to marketing
including sales, after sale
activity etc
• Large cash payments, illegal
and unlawful activity

40. What BankBook can claim for EMDG
• Bankbook will do the first two years as one grant
• A big part of their marketing will be online advertising such
as Facebook and Google ads. They will also claim the
design costs of the front page section of their site.
• They also made a “how to use BankBook” Video which
they will also claim
• They will determine how much of these will be export
based on the analytics of their website in the first 6
months
• They also employed a rep overseas to promote BankBook
BankBook.com

41. Common Issues &
Tips
• Austrade are pedantic about
substantiation and record
keeping
• Lodgments are due by the end
of November
• The earlier you lodge, the
shorter you wait to get your
grant. November lodgments
can wait for many months.
• Issues around goods not made
in Australia

42. Questions?

43. Commercialisation Australia (CA)

44. CA
What we will cover
• Why does this grant exist?
• Eligibility Criteria
• Merit Criteria
• Four Funding Options
• Common Issues & Tips
• Questions

45. Why does Commercialisation Australia
Exist?
• To provide targeted funding for Australian companies, entrepreneurs,
researchers and inventors to commercialise innovative Intellectual Property.
• It focuses on the stage after R&D where you are bringing your IP to market.
• Unlike the R&D Tax Incentive and EMDG, CA is a competitive scheme with
winners and losers in terms of who gets the funding

46. Eligibility Criteria
• A Company, University or
Public Research Agency, or an
individual applying through one
of these
• Company $10million in turnover
limit, ($50million for early stage)
• That you are able to fund your
share of the project costs
• That you have ownership or
beneficial use of the IP

47. Merit Criteria
• That you have a need for
funding and are not able to
fund the full activity yourself
• That there is a significant
market opportunity and a
compelling value proposition
• You have a sound execution
plan & appropriate
management capability
• There are significant national
benefits from your project

48. CA Four Funding
Options
• Skills & Knowledge
• Up to $50,000 to access specialist
advice and services
• Experienced Executive
• Up to $350,000 to engage a CEO or
other senior executive
• Proof of Concept
• $50,000 to $250,000 to prove the
commercial viability of new IP
• Early Stage Commercialisation
• $50,000 to $2 million to take a new
product, service or process to market

49. Skills &
Knowledge
• Funding up to $50,000,
matched on an 80:20 basis
• One year of funding
• Funds activities such as
business planning, market
research & strategy, Intellectual
Property strategies, capital
raising, developing
partnerships

50. Experienced
Executives
• Funding up to $350,000, limited
to $175,000 per year, matched
on a 50:50 basis
• Up to 2 years of funding
• Funds the employment of a
CEO or senior executive who is
crucial to taking the new
product, process or service to
market.
• Funds Salary & Package or
contracting fee plus admin
overheads

51. Proof of Concept
• Funding of $50,000 to
$250,000, matched on a 50:50
basis
• One year of funding
• Funds the development of a
prototype or proof of concept
to establish commercial
viability
• Funds labour, contracting,
plant, prototyping and IP
protection costs.

52. Early Stage
Commercialisation
• Funding of $50,000 to
$2,000,000, matched on a
50:50 basis
• Two years of funding
• Funds development, market
validation, compliance with
industry standards and early
sales
• Funds labour, contracting,
plant, prototyping and IP
protection costs.

53. Common Issues
and Tips
• If you are successful in your
application, CA will offer you
case managers and an expert
network to assist your business
• This is a competitive scheme
so you need a very good
application to be successful
• The funding rules can be
challenging to overcome
• This is the most difficult of the
grant programs we have
discussed today

54. Questions?

55. Thankyou