For early stage companies, a government grant or tax offset can sometimes be the difference between keeping the lights on or shutting down. This may sound dramatic, but for some emerging companies without full investment funding, this is a reality. It is therefore important to stay informed and avoid missing out on funds you may be entitled to.
In Australia, competition for the tax revenue that funds these schemes exists at the federal, state and local council levels which result in a constantly changing set of grant programs that start and stop depending on the priorities of the current government. As a rule, federal grant programs change less than state and local programs, but as an early stage company, keeping abreast of changes and new programs is worthwhile to be able to utilise the incentives programs to your advantage.
Sources of grant funding
Funding can come from a range of sources, including government grants, venture capital, accelerators, education programs and more. Differentiating between programs, eligibility and how to apply can be overwhelming and while you don’t want to miss out, it is equally as important to make sure you fully understand your compliance and substantiation obligations or connect with an advisor who does.
In the context of all possible sources of funding, government grants are a popular source that, if accessed properly, can reduce or limit the need to raise capital or seek support from outside investors. As they’re non-dilutionary, business owners are able to retaining ownership and control of their business – which is often extremely important.
Federal Government Program Overview
As mentioned above, federal government programs are usually the most stable and are the least likely to change. Here we have created a shortlist of some of the most popular programs available to early stage companies.
Research and Development Tax Incentive
This program is available to businesses experimenting with new products and technologies with an unknown outcome. Eligible claimants can obtain up to 43.5%* of their research and development costs as a refund or tax benefit for each year they complete eligible R&D work. This program must be claimed in a 10 month window following the company’s financial year end.
*the FY19 budget proposes to change the benefit for small companies to 41% for FY19 R&D claims onwards.
Entrepreneurs Programme (including Accelerating Commercialisation Grants)
This program supports a range of early stage companies needs and consists of; specific industry business advice; co-funded grants to commercialise novel intellectual property; funding to take advantage of growth opportunities; and collaboration opportunities. Each element of this program has a different application process and timeline.
Innovation Connections (a subset of the Entrepreneur’s Programme)
This program provides small and medium sized businesses with access to expert technology advice and development of new ideas with commercial potential. Support includes up to $50,000 in matched funding to work on collaborative projects with the research sector. Applications for this grant must be submitted within 12 months of receiving an Innovation Facilitation Report.
Tax Incentives for Investors (ESIC)
To encourage investment in high risk, early stage ventures, a generous tax incentive is available to investors who invest in ‘Early Stage Innovation Companies’ (ESICs). This incentive provides a 20% carry forward tax offset and a 10 year capital gains tax exemption for investors. There are no specific deadlines, however for the investor to be eligible, they must be investing in a company with ESIC status. This is a self assessed status which should be re-assessed on a annual basis.
Export Market Development Grant
Supporting the growth of Australian companies into overseas markets – eligible companies who are spending a minimum of $15,000 on overseas marketing, can claim up to 50% of these costs back. This program can be claimed annually from 1 July each year. See Austrade for more detail.
Also to support Australian companies expanding overseas – and while not technically a grant, Landing Pads provide market-ready Australian startups and scale ups with access to some of the world’s most renowned hubs including San Francisco, Tel Aviv, Shanghai, Berlin and Singapore. This program has three cohorts each year, which all have seperate application deadlines.
State Based Program Overview
State based programs are also important to be across. Here’s a snapshot of some popular and upcoming programs available at the time of publishing:
Minimum Viable Product (NSW)
Supporting NSW based early stage companies developing proof of concept ideas, this grant offers funding of up to $25,000 to progress their proof of concept and test their business model with consumers. Applications are open all year round.
Launch Vic (VIC)
Aimed at ecosystem capacity building rather than direct investment, LaunchVic works in partnership with entrepreneurs, industry, business, the community and educational institutions to strengthen Victoria’s entrepreneurial and startup ecosystem. Grants vary and application rounds open throughout the year.
Business Development Fund (QLD)
Queensland based companies at the forefront of commercialising cutting edge research or innovation who are seeking seed or follow-on funding have an opportunity to access between $125,000 and $2.5 million of funding. Applications can be submitted now.
New Industries Fund (WA)
For Western Australian based high tech emerging companies and regional innovation, the WA state government has recently created a “New Industries Fund” to offer grants to new and emerging businesses in the high tech sector, with $14.5 million in funding, including $4.5 million specifically allocated to drive innovation in the regions.
South Australian Early Commercialisation Fund (SA)
The SAECF is a competitive grant program established by the South Australian Government to assist SA technology companies, university research, commercialisation organisations and entrepreneurs to commercialise their intellectual property. Expression of Interest are open now.
As you can see, there are a range of programs at both federal and state level. If you’d like more information, the government sites linked above are a great starting point. For local grant opportunities please visit your local council’s website. To make the process of applying for the R&D Tax Incentive, the Export Market Development Grant, or obtaining an ATO private ruling for your ESIC status, visit Nifty Grants by PwC.
About the author
Brendan White is a Senior Grants & Incentives Specialists at Nifty Grants. Brendan has a software development and engineering background and joined PwC’s incentives and innovation team six years ago.
Nifty Grants, built and backed by PwC, makes accessing federal government grant and incentive programs simple and affordable for emerging companies niftygrants.com.au