Claiming R&D for Fintech (Financial Technology)
Claiming R&D for Fintech is one of the services Innercode can offer. The financial technology (fintech) space is fast-growing, with numerous financial services and banking systems replacing traditional methods and moving completely into the digital realm. From online wallets and money transfers such as peer-to-peer exchanges to portfolio management, trading, and virtual currencies, most financial transactions are now conducted using our phones or computers, or hardware specifically designed for handling money.
There are no signs of slowing down as consumer adoption continues to grow. Now, Australia is home to more than 800 fintech companies, worth more than $4 billion (AUD) in revenue a year. This is a massive jump from just seven years ago when the industry earned a little over $250 million (AUD).
This growth is attracting a lot of investors both locally and internationally. Apart from this, government support also abounds, from easing regulations and licensing to providing tax incentives through its research and development (R&D) scheme. Recently, the government has expanded its definition of what is acceptable R&D. For instance, knowledge or technical gaps— challenges and solutions that are not easily researched and resolved—which are caused by resource limitations, can now be claimed as R&D. This move, we predict, will entice more fintech companies to avail themselves of this scheme.
When claiming R&D, companies should be able to find activities within their projects that fall under either core or supporting activities. Core activities are those whose outcomes cannot be known in advance, and only by conducting experiments can the outcomes be determined. Below are examples of what can be considered valid core R&D activities:
- Developing a more streamlined payment processing flow
- Creating a new data processing method to acquire relevant financial data with varying formats from different accounting platforms and outputting them in a structured way
- Building a new encryption algorithm between two subsystems to ensure the security of the personal financial data of users
- Creating a central intelligence engine that processes financial data from individual assets and portfolios coming from multiple sources
Supporting activities, on the other hand, are those conducted to help in the development of a core. Below are examples of these:
- Asking questions on GitHub or StackOverflow forums to see if a technical problem has already been solved before
- Testing the new solution developed (product, processes, modules)
- Planning and managing tasks involved in the conduct of the core activity
- UI/UX design
We at Innercode can help you assess whether your fintech-related activities qualify as R&D activities. We can also guide you in maintaining a contemporaneous record system that will back up your claim. Innercode is composed of dedicated government grants consultants specialising in the R&D Tax Incentive for the software and technology industry. We have many fruitful years of experience delivering R&D Tax incentives to many fintech companies. Through our streamlined process of analysing claims, we are confident that we can help you determine your eligible projects and activities in just a few hours of your time.
References:
Software Development Sector Guide for the R&D Tax Incentive | Business.Gov.Au. 13 June 2022, https://business.gov.au/grants-and-programs/research-and-development-tax-incentive/sector-guides-for-r-and-d-tax-incentive-applicants/software-development.
‘Latest Software R&D Tax Guidance, Is Your Outcome Unknown?’ Innercode, 27 May 2022, https://innercode.com.au/innercode/latest-software-rd-tax-guidance-is-your-outcome-unknown/.
Further reading:
‘Claiming R&D for a Tech Company’. Innercode, 8 Apr. 2021, https://innercode.com.au/innercode/claiming-rd-for-a-tech-company/.
‘Claiming R&D for a Software Company’. Innercode, 23 Aug. 2021, https://innercode.com.au/innercode/claiming-rd-for-a-technology-company/.
‘Common Questions When Claiming R&D Tax Incentive’. Innercode, 26 Sept. 2022, https://innercode.com.au/innercode/common-questions-when-claiming-rd-tax-incentive/.
Sources:
‘Fintech Committee Asks for Separate Software R&D Scheme for Australia’. ZDNET, https://www.zdnet.com/finance/fintech-committee-asks-for-separate-software-r-d-scheme-for-australia/. Accessed 6 Mar. 2023.
‘The $4 Billion Pay off: 850 Fintechs Powering Australia’s Digital Finance Sector’. Australian Financial Review, 24 May 2022, https://www.afr.com/technology/4-billion-powers-the-nation-s-fintech-sector-20220520-p5an2c.
