Fiscal and Non-Fiscal Incentives for Foreign Enterprises in Australia

As an entrepreneur venturing into the Australian market, familiarizing yourself with the country’s various tax and government incentives is essential. With an extensive team of business consultants, we are dedicated to determining the kinds of incentives eligible for your enterprise. 

Business Incentives in Australia

The Australian government offers numerous business incentives, more commonly known as grants, to boost and support the business landscape in the country. There are three primary grants given to enterprises in Australia, namely: 

• Research and Development (R&D) Tax Incentive
• Export Market Development Grant
• Early Stage Innovation Company (ESIC)

Depending on the business activities you wish to engage in, you can avail of these grants to help boost your operations and growth within the Australian market. 

There are more than 500 grants and programs available in Australia. You may check with the Australian Government’s Grants and Programs Finder to help you check applicable incentives available for your business. 

The R&D Tax Incentive Program 

The Research and Development Tax Incentive (R&DTI) grant offers tax offsets to local and foreign businesses in Australia conducting eligible research and development projects or activities. The incentive was placed to encourage businesses to further invest in R&D activities to help boost the Australian economy. 

Companies eligible for the R&D Tax Incentive Program can take advantage of cash rebates and other fiscal incentives, depending on their turnover capabilities. In 2021, new tax offset benefits were released by the Australian government:

• For companies with turnovers of less than AU$20 million, the refundable tax offset under the incentive is your corporate tax rate plus an 18.5% premium. 
• For companies with turnovers of AU$20 million or more, the non-refundable tax offset is based on your corporate tax plus an incremental premium.  

How to Apply for An R&D Tax Incentive Program

Applying for an R&D Tax Incentive must be filed annually with the Industry Innovation and Science Australia (IISA) and the Australian Taxation Office (ATO). These government bodies are responsible for the administration of the R&D tax incentive. 

Generally, there is a 5-step process you can follow to apply for the incentive. 

1. Check your company’s eligibility through self-assessment 
2. Consider filing for Overseas Finding or Advance Finding
3. Conduct or continue R&D activities while self-assessing eligibility of R&D activities
4. Proceed with the registration for the R&D Program 
5. Claim your Tax Offset 

You can opt to reach out to business consulting firms or tax advisers to help guide you through the R&D process in Australia. 

The Export Market Development Grant

Enterprises involved in the import-export industry in Australia can apply for an Export Market Development Grant (EMDG) to help market and boost their products and services internationally. EMDG is an eligibility-based, demand-driven program. The grant amount approved may depend on the following: 

• Number of eligible applications in the round
• Available program budget to be shared among all eligible applicants

Micro, small, and medium-sized enterprises (MSMEs) can apply for three different grants over eight years (not necessarily consecutive) for eligible promotional activities. 

EMDG Tier System

There is a three-tier system under the EMDG program. Each tier identifies the type and amount of support provided to your company’s export needs:

• Tier 1: Ready to Export
• Tier 2: Exporting and Expanding
• Tier 3: Exporting, Expanding, and Strategic Shift

How to Apply for EMDG

To apply for an EMDG, you must check if your company is fully eligible and meets the given requirements for EMDG. These criteria are as follows:

• Turnover for the financial year must be less than AU$20 million
• Must be an Australian Person as per EMDG Rules 2021
• Must have an Australian Business Number (ABN)
• The product must be of substantially Australian origin and be of the following:
  • goods
  • services
  • events
  • intellectual property 
  • software

Once the grant is approved and funded, EMDG grant funds must be used for promotional activities to market eligible products in foreign countries or for training activities to develop skills in marketing for this purpose.

The Early Stage Innovation Company

Enterprises that are in their early stages – and believe to produce innovative products and services – can apply for an Early Stage Innovation Company (ESIC) under the Australian Government.

The ESIC program provides long and short-term tax incentives to investors acquiring shares directly from ESICs. This helps enterprises build funding for their company. These incentives are as follows: 

• Short-term Incentives:
  • Non-refundable carry forward tax offset. It is 20% of the amount paid for their eligible investments, capped at a maximum of AU$200,000 for the investor and their affiliates* combined in each income year.
• Long-term Incentives: 
  • Modified capital gains tax treatment. This incentive varies depending on the number of years ESIC shares are held by your company or investor. 

*Subject to different rates for “sophisticated” and “non-sophisticated” investors. 

How to be Eligible for an ESIC Grant

As mentioned, your company must be innovative company within its early stages with a high-growth potential. You must also be geographically broad and have the ability to scale-up. 

To be eligible, you must take an early stage test to determine whether your company is suitable for the grant. There are two types of early stage tests you can undergo, and only need to satisfy at least one of these tests:

• 100-point test. This is an objective test which requires your company to accumulate at least 100 points to pass. It is based on specific criteria that help determine an innovative company. 
• Principles-based test. This, on the other hand, is a subjective test. This test identifies is your company is developing a new or an innovation of a product that is to be commercialised. It is best to secure a Private Binding Ruling (PBR) from the Australian Tax Office (ATO) to confirm eligibility. 

Enjoy Fiscal and Non-Fiscal Incentives for Your Business in Australia

As an entrepreneur expanding in Australia, it is ideal to familiarize yourself with various tax and government incentives to help you grow your business with ease and reach its full potential quickly. 

Applying for tax incentives can be challenging task. If you find these processes complex, reaching out to business consulting firms can help guide you through specific processes and simplify your tax incentive application.