The following is a R&D Tax Incentive example of how our Framework maximised Hydrochem’s claim and reduced their Audit Risk.
HyrdoChem is a specialist company that services and design products to keep water-based systems clean and hygienic. They work with air conditioning, wastewater, chemical process systems, and so much more!
They are the people that keep us safe in large buildings such as hospitals to stop airborne diseases such as legionnaires disease from being transmitted through the air conditioning – which, of course is a water-based system.
As a chemical engineering company, HydroChem is proud of its R&D program, investing in Australian innovation since 1977. They have been at the forefront of developments to keep essential water processing and other related systems operating safely.
R&D Tax Incentive Compliance Concerns
HydroChem has an R&D program that they have been running for many years under the R&D Tax Incentive program.
When they first started with the program, they understood that they could claim their Lab technician costs under the scheme. Inbuilt into their systems and processes was careful documentation of the work to ensure they were compliant.
HydroChem’s initial concerns with the tax incentive scheme was a health check on their processes and documentation. This review focused on how they went about the R&D, from beginning to end, which quickly revealed that they were missing out on additional eligible claims under the program.
They had not been aware that they could also quite legitimately be claiming:
- Management time spent overseeing and directing the R&D program of work.
- All the test samples and field trials required to ensure that there were no adverse effects on the equipment and the environment. This also extended to the preparation of work orders to run the field trials.
- All the Supporting Activities undertaken by Finance, Admin, and HR.
The cumulative result was a substantially larger claim than previous. With the proper audit and review, they were able to easily extend the existing good practices to the entire organisation involved in the R&D program.
HydroChem R&D Tax Incentive example
In this R&D Tax Incentive example we addressed Hydrochem compliance issues. The main objective of working with HydroChem was to do a thorough audit and review of their current R&D program to ensure that they were properly documenting and supporting their claim, and to ensure that they were maximising the grant opportunity. This involved a re-documenting of their entire program from Product Strategy roadmap, Project Planning, Identification of their Eligible R&D, Test methodology, Experimental results and evaluations.
To achieve this, Softlogic used their a three-step workshop approach to ensure that the review and processes were developed collaboratively with those directly involved in the R & D program. This produces much better results as everyone is included in determining what the R&D approach and processes should be, and it empowers them with better understanding and knowledge to drive better outcomes for the company.
About the workshops
1 – Diagnostic Workshop
The first workshop is about discovering and understanding the current approach and allowing the team members to better understanding their responsibilities under the R&D tax scheme. It delivers to the R&D team:
- A documented approach on the current process and records information flow.
- An understanding of what the appropriate record keeping process should be for their research program.
- A contextual learning experience for the team members who use their own work to learn and determine what their best practices should be to make the R&D program efficient, practical, and meet the necessary compliance requirements.
- A list of what else could be claimed, as the team come to understand better their IP and how it is defined under the R&D scheme.
2 – Gap Analysis Workshop
The second workshop is focused on determining what’s missing in the current program and incorporating it into their processes from both a supporting documentation perspective and the practicalities. The output of this workshop is a:
- Detailed gap analysis with a report, which identifies the product strategy, project planning, eligibility criteria, experiment planning, and reporting
- System to capture the all-important documents into their everyday work program to make it practical and robust for continued compliance.
- Review of the current work to see whether it was compliant based on the new ‘approach.’
- An audit to check that all cost claims are being properly tracked and supported as part of the agreed processes.
3 – Consistency Workshop
The third workshop embeds the new processes and makes sure they now have continued consistency and adherence by all the team members. The output for this workshop is:
- An R&D Business Process Manual
- R&D Process Training across all areas of the business that need to adhere, e.g., product development, finance.
- A set of tailored R&D Templates to ensure the language and format to be used each time a new document is created.
- Tools and automation to make the process robust and practical on an ongoing basis.
- In this R&D Tax Incentive example the Framework was applied to shore up the compliance and reduce Audit risk
- Doubled the value of their R&D grant claim based on a clear understanding of the detail and compliant support for all claimed costs.
- A trusted process that the entire team was confident in following to support their work ongoing under the R&D tax incentive scheme.