How does the 2020 Federal budget impact access to the R&D Tax Incentive? Read on…
Government Grants 2020 for Startups
Looking for the best government grants for startups in 2020? Some of these should be your first port of call as you’re getting started on your business.
The Australian Federal Government provides a wide range of grants and incentives to startups to “enhance business competitiveness and productivity”. These can be in the form of direct cash grants, matched funding, access to professional services and tax incentives. In this article we look at the ones most useful for startups.
This is the Federal Government’s flagship programme which provides a range of grants and other support.
The Entrepreneurs programme is comprised of 4 “elements” described below (note that the “Incubator” element is not included below).
This element helps businesses take novel products, processes and services to market. Support is provided as follows;
- Matched funding up to $1m (i.e. the grant meets up to 50% of eligible commercialisation expenditure);
- Portfolio Services comprised of access to expertise and promotional opportunities.
Applicants must first receive commercialisation guidance, and can only then proceed to a grant application which is assessed on the following criteria;
Merit Criterion 1 – Need for Funding
Merit Criterion 2 – Market Opportunity
Merit Criterion 3 – Value Proposition
Merit Criterion 4 – Execution Plan
Merit Criterion 5 – Management Capability
Merit Criterion 6 – National Benefits
This element provides business with an Innovation Facilitator for the purpose of reviewing the business’ research needs and providing a Service Report.
Should the facilitator recommend it, up to $50,000 in matched funding support is available to the business for a research project in collaboration with a Publicly Funded Research Organisation (PFRO) to develop a new idea with commercial potential.
There are several incentives which are delivered as tax-based rebates or concessions.
Provides a tax offset for some of the cost of undertaking eligible research and development (R&D) activities by reducing a company’s income tax liability. Tax offsets of 43.5% or 38.5% are available for costs incurred on eligible activities (depending on a company’s annual aggregated turnover).
Importantly the 43.5% benefit is a refundable offset, meaning that a cash refund is paid even if the company incurs a taxable loss.
Early Stage Venture Capital Limited Partnerships Incentive (ESVCLP)
The ESVCLP provides fund managers and investors with tax benefits, including a tax exemption on an investor’s share of a fund’s income and gains. To qualify as an ESVCLP a venture capital fund must be a new partnership and meet a range of eligibility criteria.
The tax benefits available to investors through an ESVCLP assists startups by making them a more attractive investment proposition.
Early Stage Innovation Company (ESIC)
ESIC accreditation provides early stage investors with a tax offset of 20% of the total paid to acquire shares. The maximum ESIC tax offset that an investor is entitled to in an income year is $200,000. As a result, ESIC status may make a startup a more attractive investment proposition.
A company qualifies as an ESIC if it meets both:
- the early stage test (the company has less than $200,000 in assessable income and is not public)
and either the;
- 100-point innovation test or
- principles-based innovation test.
Both these tests are aimed at identifying companies as both early stage and genuinely engaged in innovation activities.
Austrade (Australian Trade and Investment Commission) helps Australian businesses by;
- Assisting to develop international markets
- Assisting businesses secure foreign direct investment
They offer several programmes which can benefit startups and scaleups.
Export Market Development Grant (EMDG)
The Export Market Development Grants (EMDG) scheme is available to a wide range of businesses.
The EMDG scheme:
- incentivises Australian businesses to develop export markets;
- reimburses up to 50 per cent of eligible export promotion expenses up to $150,000.
To be eligible, the business must have:
- income of not more than $50 million in the grant year;
- incurred at least $15,000 of eligible expenses under the scheme (first-time applicants can combine two years expenses);
- principal status for the export business.
The business also must have promoted one of the following:
- the export of goods or most services;
- inbound tourism;
- the export of intellectual property and know-how;
- conferences and events held in Australia.
The Landing Pads program provides market-ready startups and scaleups with a cost- effective option to expand into major global innovation hubs around the world. Landing Pads have been established in San Francisco, Tel Aviv, Shanghai, Berlin and Singapore.
Landing Pads provide market-ready startups and scaleups with:
- a ninety-day residency in a co-working space to help them grow their business by facilitating in-market business development, introductions to investors and mentor networks and strategic partnership opportunities;
- business services and in-market learnings from local and international experts;
- access to a curated community that supports Australian entrepreneurs who want to go global via shared insights and collaboration opportunities; and
- assistance post residency with business advice to help them continue to grow their business.
Other Federal Government incentives
There are a range of further incentives while not specifically targeted at startups may nevertheless be available and helpful.
CSIRO Kick-Start Program
The CSIRO Kick-Start program offers matched funding of $10,000-$50,000 to undertake the following research activities in conjunction with the CSIRO:
- Research into a new idea with commercial potential;
- Development of a novel or improved product or process;
- Test of a novel product or material.
Manufacturing Modernisation Fund
The Manufacturing Modernisation Fund (MMF) will supports transformation in small and medium manufacturing businesses though co-funded grants to upgrade manufacturing processes in capital equipment and grow highly skilled workforces.
The program will offer large-scale grants of $100,000 to $1 million on a 3-to-1 funding basis and support for transformative investments in technologies and processes.
Advancing Renewables Program
The Advancing Renewables Program is administered by the Australian Renewable Energy Agency (ARENA) and provides businesses with funding or finance to develop renewable energy technologies.
To be eligible a business must involve a renewable energy technology.
Matched funding grants are expected to be between $100,000 and $50 million.
Biomedical Translation Fund (BTF)
The BTF is an equity co-investment venture capital program which is administered by AusIndustry on behalf of the Australian Government Department of Health.
The BTF supports commercialisation of biomedical discoveries in Australia and “helps translate biomedical discoveries into high growth potential companies to deliver long term health benefits and national economic outcomes.”
The Fund operates on a co-investment basis with 3 fund managers – Brandon Capital Partners, OneVentures Management and BioScience Managers.
The BTF has total funding available of approx. $500m. Individual investments are determined on merit.
In this article we have covered the key Federal Government Grants and Incentives currently available. It worth noting are many further schemes for startups offered by State and Local government which are also worth pursuing.
There are a great selection of government grants and incentive opportunities to startups and scaleups at the Federal level. If you need help with identifying suitable grants or need help with applications such as the R&D Tax Incentive reach out to the seasoned team at Fullstack whom can assist with a straightforward application.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, crypto and entrepreneurs.