R&D TAX INCENTIVE
PREPAYMENT
FUNDING SERVICE
Australian R&D companies with less than $20 million in annual turnover that are eligible to
receive a 45% refundable tax offset, may wish to use their prospective ATO refund as security - to
drawdown a prepayment for the purpose of assisting their cash flow needs.
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FUNDING OPTIONS ARE AVAILABLE:
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2
FUNDING OPTIONS
FUNDING EXAMPLES
Short term – prepayment
of 80% of the calculated tax
refund, against a current claim
lodgement relative to the
prior year’s R&D expenses.
Short term against a current claim lodgement:
Mid-term – a quarterly or
half-yearly drawdown of up
to 80% of the expected tax
refund after incurring
current year expenses.
Mid-term – against the quarterly or half yearly incurring of R&D expenses.
R&D expenditure
$200,000
In Tax Loss x 45%
$90,000
Prepayment @ 80%
$72,000
1st drawdown in October covers July to Sept
R&D expenses = $200,000 x 45% x 80% = $72,000
2nd drawdown in January covers Oct to Dec
R&D expenses = $ 500,000 x 45% x 80% = $180,000
3rd drawdown in April covers Jan to March
R&D expenses = $200,000 x 45% x 80% = $72,000
4th drawdown in July covers April to June
R&D expenses = $ 500,000 x 45% x 80% = $180,000
Repaid from lodgement of tax return by following October = $1.4m x 45% =
$630,000 which repays the $504,000 principal loan, any applicable interest and the
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claim preparation fees – any remaining balance is refunded to the R&D company.
Longer term – against a
partially funded R&D plan
and budget, backed by a
positive Advanced finding whereby the prepayment
loan will be provided at the
commencement of a
project or financial year
(capped to 60% of the R&D
capital on hand).
Long term – prepayment at the commencement of a financial year, based
upon a budgeted R&D plan and positive Advanced finding.
• June/July each year – A R&D company’s R&D plan/budget requires $512,000
to fund its current year R&D activities.
• The R&D company has $320,000 in existing funds allocated to its R&D Plan,
but requires an additional 60% ($192,000) to complete the project.
• TCF provides $192,000 which allows the R&D company to claim back
$512.000 x 45% = $230,400
• The $230,400 R&D tax benefit is claimed and refunded by the ATO in the following
year which repays the principal loan, any applicable interest and the claim
preparation fees – any remaining balance is then refunded back to the R&D company
Fee Structure:
Establishment fee
5% of initial prepayment amount (capped at $10,000)
Annual service fee
$1,000 - $2,500 – to cover ongoing due diligence work
Interest Rate
1.25% - 1.5% per month – dependent on the size of loan
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FUNDING CRITERIA:
• Eligible R&D activities OR positive Advanced Finding
• No bank facilities
• No ATO debt
• Good record keeping practices allowing for up-to-date accounting reports being readily available
• Professional management team in place - with no prior history of insolvency, bankruptcy or criminal record
• TCF Services engaged to undertake all R&D Tax Incentive claim preparation, lodgement and compliance work
FUNDING PAYMENT AND REPAYMENT:
Once all due diligence requirements are met and the R&D Tax Prepayment loan agreement is executed,
a first payment can be processed within 48 hours.
Further drawdowns may take place as agreed against milestones and budgets being met. Ongoing due
diligence is required to confirm that the company is trading within the requirements of the loan agreement.
The principal loan amount, establishment fees, annual service fees, applicable interest and any fees for
claim preparation and lodgement services are all netted-off the resultant ATO refund payment, which is
irrevocably directed into TCF’s nominated Trust clearing account. Any remaining balance is then refunded
to the client.
CLIENT APPLICATION CHECK LIST:
• Signed Confidentiality & Service Agreement and Letter of Engagement (to perform claim preparation
and lodgement work)
• Signed and completed Prepayment Application form
• Directors Statement of Financial Position
• Monthly Management Accounts/Previous Year Tax return and Statutory Accounts
• Aged Debtors & Creditors report
• ATO Reports o Income Tax Statement – Statement of Account
o Integrated Client Account – Activity Statement List (BAS report)
o Integrated Client Account – Itemised Account
o Client Account List
• R&D Tax Prepayment Loan Agreement
• TCF trust clearing Bank Account (established to sweep funds required) - to be entered as the recipient
of the ATO refund payment.
SECURITY REQUIRED:
• PPSR Registration
• Director(s) Personal Guarantee(s) – may be required
TCF Services Pty Ltd
• Irrevocable direction to external accountant, to insert
Phone +61 2 8219 4900
Fax +61 2 8219 4999
TCF’s Trust Bank clearing account into clients tax return.
Gerry Frittmann:
David Tonkin:
gerry@tcf.net.au
david@tcf.net.au
www.tcf.net.au
www.tcf.net.au