When it comes to locking onto a cash flow boost, businesses doing R&D are like heat-seeking missiles. They’re hardwired to hunt down fresh capital. But it’s slim pickings these days. The pandemic continues to cut a swathe through our communities. Nervous investors have either retreated or are taking longer over funding decisions. And with the pandemic dragging on, time is ebbing away for some businesses with R&D. More and more Australian innovators are at risk of cash-flow shortfalls. So how do you fight back and avoid your business becoming a victim of the COVID-19 crisis?
Let’s look at five ways you could boost your cash flow.
1. Federal government programs galore
In this blog, we zeroed in on the long-awaited changes to the Federal Government R&D tax incentive (RDTI) unveiled, in October’s Federal Budget. But the Federal Government’s support for businesses with R&D didn’t begin and end with this $2 billion RDTI boost. The 2020 Federal Budget handed down a raft of programs that could seriously improve your cash flow position. Here are just a few that your business could be eligible to apply for in 2021.
Modern Manufacturing Strategy
The Federal Government used the Federal Budget to unveil its new Modern Manufacturing Strategy The updated strategy comprises of three key programs:
- Modern Manufacturing Initiative (expressions of interest open just before mid-2021)
- Supply Chain Resilience Initiative (available from 1 July 2021)
- Manufacturing Modernisation Fund (MMF) (starts before the end of 2020)
Funding for the government’s three-pronged Modern Manufacturing Strategy will be rolled out in a staged-approach. The first cab off the rank that could assist your business cash flow is the Manufacturing Modernisation Fund (MMF). The government is committing $52.8million to the program and the MMF’s second round will support 150 businesses to collaborate, scale and commercialise their manufacturing. To qualify, companies need to fall under the government’s National Manufacturing Priorities which are:
- Resources Technology & Critical Minerals Processing
- Food & Beverage
- Medical Products
- Recycling & Clean Energy
- Defence
- Space
To qualify, companies must show expected job growth, be upskilling their existing employees and align with the National Manufacturing Priorities. The fund will offer sizable grants of between $100,000 and $1,000,000 on a 3-to-1 co-funded basis.
Women in business
The government is putting an extra $35.9 million on the table to expand its Boosting Female Founders initiative. The initiative aims to give women entrepreneurs access to expert mentoring and business advice. This funding boost will support 282 start-ups and 4,300 mentoring engagements for female entrepreneurs.
Temporary full expensing
Temporary full expensing is a temporary tax incentive design to support new investment and provide a cash flow boost to businesses. The government says that around 3.5 million businesses (over 99 per cent of businesses) will be eligible. It applies from 6 October 2020 to 30 June 2022. The incentive will allow companies with turnovers up to $5 billion to deduct the full cost of eligible depreciable assets in the first year they are used or installed and ready to use. Businesses can also fully deduct the cost of improvements made during this period to eligible depreciable assets they already have.
Instant asset write-off extended once again
Eligible businesses that purchase eligible new or second-hand assets under the government’s enhanced $150,000 instant asset write-off scheme by 31 December 2020 now have until 30 June 2021, to first use (or installed ready to use) those assets.
2. Temporary loss carry-back
Thanks to the Federal Budget, you can now offset losses from FY 2019-20, 2020-21 and 2021-22 against profits you made in FY 2018-19 without breaking the space-time continuum. If your business generates annual revenue of up to $5 billion and has seen profits plunge into the red, then this is worth a look. It could provide a welcome future cash flow boost.
3. Lifting the lid on 10 concessions for small business
The government has raised the aggregated annual turnover limit from $10 million to $50 million on several small business tax concessions. These Federal Budget measures provide tax relief, a welcome cash flow boost and reduced red tape for hard-pressed businesses. Here’s a run-down of all 10 concessions and when they apply:
Starting 1 July 2020 eligible businesses can access:
- immediate deductions for their qualifying start-up costs
- immediate deductions for qualifying outlays paid in advance
Starting 1 April 2021 eligible businesses can access:
- an exemption from the 47% fringe benefits tax on car parking given to employees
- an exemption from the 47% fringe benefits tax on work-related portable electronic devices (including phones or laptops) for employees
Starting 1 July 2021 eligible businesses can access:
- streamlined trading stock rules
- remit pay-as-you-go instalments based on GDP adjusted notional tax
- monthly settlements for excise duty on eligible goods
- monthly settlement of excise-equivalent customs duty on eligible goods
- two-year amendment period for income tax assessments for income years starting from 1 July.
- a simplified accounting method for GST purposes for eligible businesses
4. Think local
When it comes to government COVID-19 measures that give a cash flow boost, it pays to think local. Look at what your state and territory government is doing to support local businesses.
5. Use your R&D tax refund the strategic way
Grants, incentives and COVID-19 stimulus measures have been a moving feast. With so much happening in this space, you may have overlooked the RDTI. Do so at your peril.
The Federal Government just got serious about this incentive. Good news for businesses with R&D. Measures announced in the 2020 Federal Budget lifted the ceiling on R&D expenditure to $150 million and removed the cap on refunds. Rather than reducing the percentage refund per R&D dollar spent, the government has held it steady for businesses with aggregated annual turnovers up to $20 million. Radium Capital’s R&D advances let you bring forward your refund and will give you a well-deserved cash flow boost to round out 2020. It’s quick and easy to apply, and our experts will work with you from start to finish. Radium Advances can help you improve your capital and cash flow position beyond bringing your tax refund forward. You can use Radium Advances as many times as you like every year. Each new Radium Advance triggers more refunds. These make your R&D dollars work harder and your budget go further.
So if you want to keep your cash flow strong, get in touch on 1800 723 486 or contact us today. We’re here to help your business succeed.