Article in Australian Institute of Company DIrectors 7 May 2015
Spare cash for new business ideas or research is often tough to find but federal, state and territory governments are handing out millions of dollars each year in grants and tax incentives to help enterprises of all sizes.
The aim is to provide government support for innovation, export, environmental initiatives and a host of other measures.
Many business are simply not aware of the wide range of grants available, says Ivan Kaye, CEO of business consultancy BSI. "Or, if they are, it’s just too hard. The red tape people have to go through is incredible."
But those who patiently work their way through the paperwork (or hire consultants to do it for them) can reap significant rewards.
Kaye gives an example from his own business, which used a tax break and a business grant to help defray the development costs and marketing of a new app it launched two years ago.
The app, called Referron, provides a way to refer potential clients to businesses and for the business to measure, track and reward the referrals.
To begin with, after spending $300,000 developing the app, BSI received $120,000 back after qualifying for the Research and Development Tax Incentive, says Kaye.
Promoted as a "targeted, generous and easy-to-access entitlement program", the tax incentive is open to all firms in all sectors that carry out eligible R&D. Companies may receive a refundable tax offset of up to 45 per cent under the scheme.
"A lot of businesses who do R&D may not be aware that they qualify or think it’s too hard to get," says Kaye. There’s a bit of work in checking that you actually qualify for the incentive, he says, and then it’s necessary to prove that the R&D was carried out.
Firms such as BSI specialise in helping companies to work out their entitlement to this and other grants and incentives, says Kaye. And often payment is in the form of a "success fee" of around 3 per cent of the value of the grant or incentive.
Help to sell overseas
With BSI’s app up and running, Kaye was keen to market the product overseas.
To help fund the costs of travel and appointing a permanent representative in the United States, Kaye turned to an Export Market Development Grant. This grant provides a 50 per cent refund certain marketing costs over $5,000.
"So assume I spent $25,000 on airfares and another $10,000 on accommodation over a period of a year – let’s say 30-40 days – and I could claim back $300 a day for the number of days I’m away. So that’s another $12,000 that goes onto my expenditure," says Kaye.
The cost of hiring a representative to promote the app is also claimable under the grant as is the cost of Google AdWords.
"What we’ve found is, whatever you spend on R&D, you probably spend at least three times marketing," says Kaye.
"So if you spend $305,000, they take off the first $5,000, then you divide it by two and the government will give you a grant of $150,000."
You can expect some hoops to jump through to claim. Your documentation of the expenses and payments needs to meet certain standards, says Kaye.
Kaye received received recommends companies investigate the grants and incentives available not necessarily just to chase a one-off bonus but as part of an overall strategy to help expand their business.
For more information about government grants and incentive programs, go to business.gov.au