31 Jan 2021

The Good, The Bad, and The Amended: Grants and Tax Incentives

Whether it was global supply chains or a basic daily morning routine, Covid 19 disrupted every facet of our life in 2020. The physical world came to a standstill, with border closures and restricted movement; however, the digital world boomed. Businesses in Australia were expected to have a robust digital presence overnight. Many small retail enterprises moved to digital and leveraged the whopping 200,000 Australians who were shopping online for the first time. The governments of various affected states provided financial grants for Small and Medium businesses as they transitioned into an e-commerce model. By July 2020, e-commerce sales comprised 14% of the Australian Retail Market.

31 Jan 2021
As we move into the year 2021, very few cases have been reported, and various State Governments have reopened businesses and leisure activities. Many of the grants and financial support are being revisited and revised.
Significant changes have been made to the Export Market Development Grants and the Research and Development Grant.

What does it all mean?

The Export Market Development Grant:

According to a survey by Loqate GBG, Aussies are big international shoppers. Australia ranks third internationally when making transactions in the US and UK and having these goods delivered home.


The government of Australia aims to bring home this export revenue by encouraging international buyers to purchase Aussie goods. As more and more people are cross-border shopping at retail and wholesale levels, the Australian government wants to expand its presence in the global trade market and establish itself within the global value chains.


To support this goal, the government has set up an annual $157.9 million budget for its Export Market Development Grant (EMDG), which was bumped up to $207.7 million as a response to COVID-19, for the financial year 2019-20. Via this grant, small and medium businesses ready to expand into export markets can claim up to a 50% reimbursement on expenses. These grants can be accessed, subject to availability, up to eight times annually. The government has also confirmed that GST will not apply to EMDG grants.


Positive takeaway:

In light of the pandemic, the government has waived off the export performance test for all businesses applying for their 3rd to 8th grant. This means that all grant amounts will be determined by eligible expenditure, and AusTrade will not consider the company’s export revenue for the financial year 2019-2020.



From 1st July 2021, an amendment to the EMDG grant will come into effect. The government will no longer follow the previously operating, open to all, grant application process. It will be replaced instead by a scaled-down, pre-approved grant scheme. Despite global markets still recovering from the COVID-19 shock, the government is going ahead with its amendments to the legislation. The new legislation may negatively impact many current beneficiaries of the grant, from whom, this on-going year may be the last year they can avail this benefit.


The Research and Development Grant:

The government has fueled innovation since the 1980s, via its R & D tax incentive, supporting businesses that spend on improvising and bettering their offerings via extensive research. While the grant remains unchanged, year on year, amendments are made on the eligibility requirements. The primary benefits include a 43.5% tax offset for entities with a turnover of less than $20 million. These tax offsets reduce a business’s tax liability. They can even be refunded as a cash refund from the ATO if it exceeds the business’s tax liability. AusIndustry oversees the registration of an entity’s R & D activities and helps ensure they comply with the law.


The Positive Takeaway:

From 1st July 2021, the tax incentive for companies with a turnover of less than $20 million is increasing to the company’s tax rate plus 18.5%. For those companies with an aggregated turnover of more than $20 million, an intensity test has been introduced, whereby the incentive provided currently will either remain the same or be increased. This will help companies effectively utilize the current landscape of change to understand how their offerings can be made more future proof, dedicating consistent resources to R & D, backed by government support.



Several new guidelines outline the eligibility criteria for the R & D Tax incentive. On-going cases at the Administrative Appeals Tribunal and Federal court have also impacted the distribution of the grant.

A new claim form has been introduced, which will be applicable during the current financial year of 2020-21. This can significantly impact the grants given to the STEM and IT sector, and other industries carrying on R & D.

While the availability of Small and Medium businesses’ grants may keep fluctuating – one thing is for sure, Australia’s moving towards a digital wave, and we encourage SMEs to ride this wave. Our advice is to look into transitioning their business online to avoid missing out on online sales. Not sure how that works? Give us a call or drop us an email!

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