Tasty Tax Offsets
In an era of avocado toasts and craft beers, being average is not an option. Businesses in the food and beverage industry are constantly searching for ways to improve their current products and create new products eager to please our generation of ‘refined’ taste.
This applies particularly to alcohol- breweries and distilleries are popping up everywhere, and with peaking interest from the public, they aren’t going anywhere quickly. Innovation is prevalent in the liquor biz, from creating new flavours using a variety of ingredients to testing automated bottling or canning processes and everything in between. There is constant research and development, resulting in growth and recognition of local businesses for their unique products.
Making a start in the food and beverage industry can be a challenge, with many competitors in the market, a point of difference is key in taking you from local legend to nationally or even internationally renowned. Lack of funds can put a heavy strain on businesses spending their well-earned dollars on improving and innovating, to continue growth they need to ensure good cash flow, and what better way to do this than receive money back from the government for developing your own products.
If you’re reading this, chances are you know about the R&D Tax Incentive- if not, you need to. The R&D Tax Incentive is a government-based program offering businesses the opportunity to claim up to 43.5% of their expenditure spent on eligible research and development activities if you have an aggregated turnover of less than $20 million (and a minimum of $20,000 eligible expenditure). If your company has an aggregated turnover of more than $20 million and is an entity eligible to claim, your offset is non-refundable and up to 38.5%.
In order to claim the incentive, at least one ‘core activity’ must have been carried out during the year. The two key factors defining a ‘core R&D activity’ are of which the outcome could not be known in advance and are conducted for the purpose of generating new knowledge. If these are completed in a systematic fashion and contain experimental activities, they can be deemed R&D.
If you are conducting trials and testing to better improve your current product or innovating a new product, chances are you are already involved in R&D activities. Still unsure of how this applies to you and your brewery or distillery? Some examples of activities indicating R&D you could be conducting are as follows;
- New or improved ingredient processing, malting or filtering methodologies
- Testing of product ingredient combinations relative to new flavours or enhancements
- Automating bottling or canning processes
- Custom designed storage
- Developing new or improved keg filling techniques, water recycling or waste management
- Improving cold stabilisation techniques to reduce energy consumption
- Large capital investments (e.g new storage, refrigeration)
- Laboratory testing
This is a very short list compared to the scale of different R&D trials and testing you could already be doing without realising it could be eligible for the Tax Incentive.
So, next time you spend the money to modify some machinery to get that perfectly preservative-free pineapple flavour into your craft beer- think about the tasty tax offsets you could be claiming.
The schooner, the better.
The information contained in this blog is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. In all cases, you should consult with a professional advisor familiar with your factual situation for advice concerning specific matters before making any decisions. By reading this blog, you confirm your understanding of this disclaimer.