The road to success for startups is uncertain and awareness of funding and incentive opportunities is a helpful element of giving a startup every chance of success.
Fortunately, there are a number of grants and incentive programs accessible to support innovative companies. These programs are designed to help commercialise innovative ideas, as well as provide support to improve business strategy, refine processes, and to enhance growth potential. However based on our experience, the potential benefits of the grants and incentives needs to be weighed against the time and costs to apply.
We summarise below, some of the key grants and incentives available for Victorian companies:
1. R&D Tax Incentive
Companies with an annual turnover of $20 million or more may be eligible to claim a cash refund of 43.5% of eligible R&D spend as an R&D tax incentive as part of the annual tax return lodged.
The R&D tax incentive is arguably the most significant opportunity for startup companies as there is no cap in eligible R&D claims and it operates under a “self assessment” system. However significant care is required to document and justify eligible claims.
2. Early Stage Innovation Company (ESIC) Tax Incentives
These tax incentives are intended to connect ESIC’s with investors who have funds and knowledge in business. The tax incentives provide eligible investors who purchase new shares in an ESIC with:
- A 20% non-refundable carry-forward tax offset for qualifying investments capped at $200,000 for each investor; and
- An exemption from Capital Gains Tax (CGT) for qualifying investments held between 12 months and 10 years.
3. Employee Share Scheme (ESS) Startup Concessions
The Employee Share Scheme startup concessions reduces the compliance obligations encountered by small businesses in setting up and maintaining employee share schemes. The key features of the ESS start up provisions are:
- No tax paid until the options or shares are sold.
- Any gains derived from the options or shares have access to the CGT provisions and therefore the 50% CGT discount.
- The ATO has also provided template offer letters and ESS agreements.
- The Commissioner, has released simplified valuation methodologies for the purposes of valuing shares relating to the ESS startup concession.
4. Expert Market Development Grant (EMDG)
The EMDG supports Australian exports and promotes the Australian tourism industry by potentially reimbursing 50% of costs exceeding $5,000 for business that have $15,000 or more in export promotion.
5. Entrepreneurs Programme
The Entrepreneurs Programme is a related set of sub programs offered by the Federal Government to provide potential access to funding advisors and facilitators. For example, this includes the Accelerating Commercialisation Grants which offers ventures up to 50% on eligible expenditures. The maximum grant is $250,000 for commercialisation offices and eligible partner entities and $1 million for all other applicants.
6. Public Sector Innovation Fund – Victoria
The fund supports collaborative, small-scale projects that build innovation in the Victorian public sector. This fund provides individual grants on average of $50,000 to $400,000. There is no cap but $11 million is available.
7. City of Melbourne Small Business Grant
The grant funds a broad range of capital improvements including office fit-outs, factory upgrades, website development, IT equipment, specialised equipment and software. The four grant categories are:
- Startup – assisting with the formation of new and innovative small businesses. Grants up to $30,000 are available.
- Business expansion – supporting existing businesses which are moving into other innovative services or products. Grants up to $30,000 are available.
- Export entry – encouraging businesses to spread into new overseas markets. Grants up to $10,000 are available.
- Business support services – supporting member-based organisations to deliver new initiatives and visible benefits to their members. Grants up to $10,000 are available.
8. Launch Vic – Victoria
This $60 million fund supports programs for startups and entrepreneurs in Victoria by:
- Developing a more collaborative and connected network of co-working spaces, incubators and accelerators to transform ideas into sustainable startups.
- Encouraging destination hubs that foster capacity and connectedness within the startup community that helps raise Victoria’s image as a driving force for startups.
- Building competence by improving support, education programs, mentoring, events, competitions, hackathons, access to venture capital and startup ecosystem mapping.
Grants for this program are provided on a case-by-case basis.
9. Future Industries Fund – Manufacturing Program – Victoria
The Future Industries Fund assists businesses to invest in new manufacturing technologies and processes in their Victorian operations.
10. New Energy Jobs Fund – Victoria
This fund supports projects that create long-term sustainable jobs, increase the adoption of renewable energy generation, reduce greenhouse gas emissions and increase the advancement of new energy technologies in Victoria. This fund provides individual grants of between $50,000 and $1 million.
11. Regional Infrastructure Fund – Victoria
The Regional Infrastructure Fund promotes investment in regional infrastructure projects in areas of visitor economy, productive and liveable cities, infrastructure innovation and regional development. This fund provides individual grants of up to $500,000.
12. The Victoria-Israeli Science Innovation and Technology Scheme – Victoria
This program supports Victorian companies who work together with Israeli companies on research and development activities for products, processes or services connected to technology. This fund provides individual grants of up to $250,000.
13. Local Industry Fund for Transition – Victoria
The Local Industry Fund for Transition program provides funding for projects which support capital investment by businesses located or wanting to locate to Melbourne’s North, West, South-East and Geelong Region. The aim is to create jobs and add to the economic development in these areas which have been affected by the departure of large scale manufacturing operations in Victoria. This fund provides individual grants of up to $2 million.
14. Assigned Production Investment Games – Victoria
The Assigned Production Investment Games Fund supports Victorian game companies with creating and marketing a variety of games for any platform with a focus on the generation of intellectual property and long-term benefits for their business. The fund provides individual grants of up to $150,000.
One of the key planning matters when commencing and growing a startup is to ensure the right tax and legal structure is set up to benefit from their opportunities. For example, we unfortunately see cases where a business is created under a trust structure which can result in missed R&D tax incentive claim opportunities and significant costs and time incurred to restructure the business.