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Companies have also had to adjust product lines to address the shift in consumer preferences for sustainable and healthier product alternatives across the Food & Beverage sector.
Additionally, agribusinesses are required to reduce emissions in line with the Agriculture and Land plan set out by the Department of Agriculture, Fisheries and Foresty to support Australia’s net zero greenhouse gas emissions target by 2050.
The above factors, in combination with the transition to technology-driven farming methods, present an opportunity and need for companies in the Agribusiness sector to conduct product and process innovation.
To facilitate continued innovation, the Federal Government’s Research and Development Tax Incentive (RDTI) supports companies to undertake research and development (R&D) activities that meet the eligibility criteria.
The RDTI has been in place for several years and can provide vital funding to support innovation and R&D by corporates. It has a clear eligibility criteria and it does not apply to all entities so it is important that you work through whether you can access the program. It has different levels of support depending on a company’s aggregated turnover (grouping rules apply).
Given these benefits, the RDTI can be used to support and foster a business’ investment in product and process innovation. However, there are several specific eligibility considerations that companies in the Agribusiness sector should consider in assessing potential R&D activities.
From our experience in the Agribusiness sector, the regulators have provided some good guidance that you should consider before claiming the RDTI to help you determine whether you can access the support available under the program:
First, you need to ensure your activities are not general BAU activities and meet the definition requirements. Activities undertaken to improve productivity or sustainability in Agribusiness are not necessarily undertaken for a significant purpose of generating new knowledge and therefore, may not be eligible for the RDTI, as raised by Taxpayer Alert 2017/4. This may be because:
Taxpayer Alert 2017/4 flags that activities claimed through the RDTI must follow a systematic progression of experimental work. Key considerations when determining whether experimental activities satisfy this requirement are as follows:
All of these stages must be documented as evidence is always needed to support your claim and could be called upon in the event of a review by either regulator.
A particular focus area of the program announced in Taxpayer Alert 2015/3 is broadacre farming, which has been linked to the new knowledge, experimental, and established product/practice considerations noted above. This could be in relation to the use of soil improvers, including fertilisers, microbes, and other treatments.
Taxpayer Alert 2015/3 notes that if activities are being carried out across a whole farm (e.g. application of soil improvers), it is unlikely that the activity is being conducted for the significant purpose of generating new knowledge. Rather, it is more likely that a known technique or product is being used for a commercial purpose. This is broadly due to the following:
A particular focus area of the program announced in Taxpayer Alert 2015/3 is broadacre farming, which has been linked to the new knowledge, experimental, and established product/practice considerations noted above. This could be in relation to the use of soil improvers, including fertilisers, microbes, and other treatments.
Taxpayer Alert 2015/3 notes that if activities are being carried out across a whole farm (e.g. application of soil improvers), it is unlikely that the activity is being conducted for the significant purpose of generating new knowledge. Rather, it is more likely that a known technique or product is being used for a commercial purpose. This is broadly due to the following:
In addition to the above common misconceptions, we often encounter companies that have claimed R&D in the past without having robust R&D governance documentation. This is key to showing that you have an effective and strong tax risk management and governance framework. The ATO has shown in their recent review activity that appropriate Tax Governance is a high priority, and any tax incentives claimed need to be considered as part of these governance processes.
Setting up the right governance and documentation processes from the outset will ensure a strong position in the event of an ATO or AusIndustry review.
As we have highlighted there is support available to undertake R&D activities in the agribusiness sector if you meet the criteria which is detailed and comprehensive. If you need assistance to navigate the RDTI our national specialist team can assist you in identifying your eligible R&D activities.
