What does the international Organisation for Economic Co-operation and Development (OECD) know about R&D activity? Quite a lot judging by all the studies it has sponsored.

Firstly, a quick history. The OECD began under another name in 1948 as purely a European body of a few member countries to address post-WWII economic issues. But in 1961 the current format of thirty four high-income economies, including Australia, evolved to monitor policies, share knowledge and rate performance.

In 2001 Australia sought to stimulate R&D expenditure through tax relief. Because both R&D grant funding and tax benefits have been significant in Australia, as elsewhere, the OECD has studied activity in this sector for most member countries and reported about behaviours and impacts.

The last OECD report about Australian R&D, although six years old, still has relevance today. Innovating companies were found to build competencies, create networks and achieve commercialisation far more readily in the government-supported R&D sector.

Positive impacts on company behaviour through R&D included a better understanding of benefits arising, higher commitment to innovation, improved management of the process, enhanced business strategy and more collaboration with universities; all commendable outcomes just as valuable today.

The message is compelling, innovation is vital, and Eundo provides quality R&D advice to help start-ups and established corporate’s alike.

With the election of a Liberal-National Party coalition government from the recent Federal poll on September 7th, changes to the bureaucracy that supports industry and R&D may be expected. We now have a Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education with Hon. Ian Macfarlane MP sworn in as Minister and Hon. Bob Baldwin MP becoming Parliamentary Secretary to the Minister.

Whilst we must wait to see what changes Minister Macfarlane and his Cabinet colleagues may implement, the Department meanwhile continues to work with the 2013-14 Budget adopted by the Federal Parliament in May 2013. Of interest is what priorities exist in that Budget, even though not framed by the new Minister.

So where will Federal funding support be directed throughout this current financial year? More than a third goes to the higher education sector, another quarter to secondary industry, significant amounts to medical and science research and then down to defence, rural and environmental research.

As well as formalising R&D Tax Incentive claims for clients, Eundo manages funding applications on behalf of SME’s and Not-for-Profits across all sectors. To one degree or another every Federal Minister oversees programs which reflect the delivery of policy initiatives. Nearly three quarters of funding comes from Mr Macfarlane’s portfolio, next from the Health & Aging Minister, and then significant amounts from each of the Ministers for Defence, Agriculture and Resources.

Eundo understands the application process into Government Departments and the funding outcomes that result for clients.

Entrepreneurs undertaking research understand that, if they want to take advantage of the opportunity that exists with the R&D Tax Incentive, some legal and accounting rigour will be required to secure the best outcome. This is no different to any other aspect of a company’s compliance obligations. Eundo specialises in managing these technical R&D issues for clients.

One critical aspect of any claim requires a distinction between what are defined in the law as core activities as against supporting activities of any R&D effort. Although we have blogged about this before, some further clarification can now be found in guidelines posted on government websites, and it is so important.

Features of a core activity should include experimentation to achieve an outcome not previously in existence, be conducted in a methodical and logical way and with the purpose to generate new knowledge. Outcomes could include services, products or processes in any sector of our economy; the possibilities are literally endless. But a word of caution; the absence of a core activity will jeopardise any R&D claim.

Similarly, supporting activities are potentially very broad in nature. The guideline somewhat cryptically says any supporting activity will be directly related to a core activity, and also speaks of dominant purpose in certain circumstances.

Eundo’s experience leads to professional advice for researchers and their R&D Tax Incentive claim.

Every year a three-way consortium from Cornell University, The Business School for the World and the World Intellectual Property Organisation publish their Global Innovation Index to rank national economies in terms of their innovation performance. In 2013, and for the first time, Australia appeared in the Top20 most innovative economies, ranking 19^th out of 142 countries surveyed. This annual study uses 84 diverse indicators to compile an index for each participant and establish their relative standing.

And which country is the most innovative? Well, Switzerland is first followed by Sweden, Britain, Netherlands and USA to round out the Top5. In our region Hong Kong was 7^th, Singapore 8^th and New Zealand came in 17^th. Perhaps not surprisingly it is higher-income economies that dominate the list and generally outpace developing countries.

If past year measures are analysed, there is a consistent theme where the Top20 or so economies maintain their high grouping even if they might experience minor movements up or down the rankings. One inference from this is that successful innovation breeds innovation, along with investment and talent. All the indicators suggest that an economy like Australia’s must persist and strive with innovation for all the benefits it brings.

At Eundo we assist clients achieve the rewards that are possible from the taxation and funding systems so that they may make their contribution towards global innovation.

Internationally, the OECD describes R&D as “creative work undertaken on a systematic basis….to increase the stock of knowledge, including….man, culture and society, and….to devise new applications.” R&D may also include enhancements to existing products or services right up until any activity ceases to be experimental.

It may be of interest to understand something of the size of our national R&D sector. In Australia a reliable source of R&D data may be found in the Australian Bureau of Statistics year book, the 2012 edition of which issued last week. This analysis captures gross expenditure by business, government, higher education and private, with particular focus on business R&D.

Ten years ago Australian R&D spending was less than $14billion (business <$7billion) whereas in 2012 activity is generally thought to have exceeded $35billion (business >$21billion). Manufacturing and mining companies are by far the biggest spenders, with financial and scientific services each coming next but with only about half the spending of the first two.

Technically, expenditure in the R&D sector falls into one of four categories: namely, pure basic research, strategic basic research, applied research or experimental development. Eundo assists clients to navigate their way through these technicalities and then will identify, collate and quantify eligible expenditure so that a compliant and robust R&D tax incentive is claimed.