Starting The Innovation Journey
Many SMEs set out with a vision to develop a product, process, service or some other business activity. Unfortunately, some people don’t take into consideration the entire process in their initial thinking. An appropriate terminology for the process is “the innovation journey”.
The innovation journey does require planning and an understanding of the time that it will take, the documentation required much of which will need to be provided by an external expert.
This means that costs will be a significant issue for most innovators.
Research and Development
The innovation journey normally starts with research and development. To claim the Research and Development Tax Offset the applicant must be a company and maintain the records of research and development activities as required by the rules specified by the Australian Taxation Office.
If the company is spending more than $20,000 in the financial year on legitimate research and development activities and all of the records pertaining to that research and development expenditure have been maintained the company should be able to claim 43.5% of that research and development expenditure as the Research and Development Tax Offset.
If the company is trading at a loss the company is able to make an election in its income tax return that the cash equivalent of the Research and Development Tax Offset is paid by the Australian Tax Office to the company’s nominated bank account subject to the company’s tax losses exceeding the calculated Research and Development Tax Offset amount.
Starting the Journey
To start the “innovation journey” please contact us for advice on the record keeping requirements that the company will need to maintain to be able to successfully claim the Research and Development Tax Offset.
Government grants are a great way to receive assistance without too many strings attached i.e. rarely does a government grant impose any sort of ownership being transferred to a government agency.
There are a number of grants that might be suitable for a business undertaking the innovation journey.
A popular grant that assisted many companies that were on the “innovation journey” was the “Accelerating Commercialisation Grant” which operated for about twelve years until it was phased out in the 2023/24 Australian Government Budget.
In the budget speech the Federal Treasurer indicated that the Government was proposing to introduce a similar grant to the Accelerating Commercialisation Grant later in 2023.
Some information has been released on the Internet which indicates:
Business Plans – are important, in fact a Business Plan is just as important for a business person as a map is for a tourist – if you don’t know where you are going how are you going to know when you get there and more importantly how do you know when you are off track on your overall strategy?
To participate in the “innovation journey” a business needs a guidance book and this is its own Business Plan.
A Business Plan should be developed exclusively for your business and not be taken out of a textbook or someone else’s modified plan.
Your Business Plan needs to be unique. It needs to analyse your business so that like a tourist you plan your business journey and you determine what you wish to achieve at various stages so that you are able to compare where you are at and what you have achieved against the original plan.
The key components of a Business Plan for a company on the “innovation journey” are:
To be able to claim the taxation benefits you must have a “core activity”. A core activity is something:
Details of any patents granted, provisional patents held or patent applications currently been assessed.
T – trends affecting your firm
O – opportunities that are available
W – weaknesses to be fixed
S – strengths to be built on
The innovation journey can be challenging, exciting and very rewarding for some people.
Unfortunately, some people do not get advice early enough in the process so that some of their activities might not qualify for the Research and Development Tax Offset and that can cause problems for some of the other activities relating to bringing the innovation project to a successful conclusion.
This article will be continued in the November edition of Business Plus.
If you would like to have a discussion about the commencing an Innovation Journey, please give us a call on 1800 232 088 or send an email to or visit our website www.towersbusiness.com.au.
Crowd Sourced Funding Equity Raising means:
Maximum amount of capital to be raised by a Crowd Sourced Funding Company means:
Maximum investment by a “retail investor” in a Crowd Sourced Funding Company means:
Retail Investor is described as:
The person acquiring the securities or crowdfunding service “DOES NOT GIVE” the Crowd Sourced Funding Intermediary a certificate prepared by a qualified accountant within the preceding two years that states the person has net assets of $2.5 million, or gross income in the last two financial years of at least $250,000.
There are a number of ongoing business activities that can be implemented to assist businesses to perform better, such as:
Using a “Charge out Rate Calculator” is important for tradie and manufacturing businesses, to get the individual charge out rates for each team member at an amount, which will enable the business to achieve its targeted profitability.
There are a number of components in ensuring that the business will trade at the targeted profit including:
Once you have established the charge out rate, it is important to monitor the actual hours being charged clients on a weekly/monthly basis.
Each month, the Profit and Loss Account should be produced together with a summary of Key Performance Indicators, so that a decision can be made as to whether to vary charge out rates for some or all of the team members because of non-achievement of the budgeted profit target for the month.
The preparation of “Predictive Accounting Reports“ will assist in the implementation of the strategies that you have included in your Business Plan, or strategic review.
The “Predictive Accounting Process” assists business people to plan your future. We believe this is the most important work that an accountant can perform for a business.
The Predictive Accounting Process incorporates four (4) key components:
The CEO/Owner then has the opportunity to analyse the projected financial picture of the business and decide whether that end result is acceptable. If the CEO/owner would prefer a different result, financial projections can then be prepared to identify the changes that will have to be made, to achieve a different financial position.
If you would like to understand more about the Predictive Accounting and how it might apply to your business, please telephone Peter Towers on 1800 232 088 to arrange a complimentary zoom meeting, or send us an email: .