Where companies aim to create new or improved products, processes, services etc, and develop technology to do so, they might also make a claim under the Research and Developments (R&D) tax incentive.
A project manager may overlook a claim for the R&D incentive perceiving that grants clawback wipes out any tax saving. Whilst that is often true, examination of the terms of the grant often results in some tax saving.
A company receiving a grant from government for R&D activities claimed as a tax offset must pay additional income tax of ten percent on that recoupment (referred to as clawback). Importantly section 355-450(3) sets a cap on extra income tax if the recoupment (in this case the grant) relates to a project such that the clawback is capped in proportion to the grant that relates to R&D expenditure over the total expenditure on the grant.
Cleantech grant $2 million, project spend $1 million on R&D plus $4 million on plant expenditure.
Clawback = 10 percent of 1/5th of $2 million = $40,000.
The net tax saving for large taxpayer is $60,000 and for small taxpayer (<$20 million turnover) $110,000.
Companies with less than $20 million turnover should always claim a project even those subject to a grant because they receive a five percent permanent benefit even where clawback applies to the entire R&D claim.