The pilot-plant records a materials scale-up needs before either funding track opens

What was broken

A recognised sustainable-materials startup needed non-dilutive capital to scale from prototype toward pilot manufacturing.

What we did

CapEasy structured the funding proposal for a convertible-debt (scaling) instrument — eligibility, a compliant utilisation plan, and the milestone and financial framing institutional backers expect.

We positioned the application to clear the fund’s review committee at the higher, debt-instrument tier.

A seed fund approval is the review committee’s sanction; actual disbursement follows the program’s due-diligence and compliance milestones and is not guaranteed.

Where it landed

Approved for a seed-fund convertible-debt tranche through an incubator-backed program; funds are milestone-released.

Two funding tracks for a materials scale-up, and neither runs on the same clock

The R&D Tax Incentive (R&DTI) is the piece that runs every income year rather than opening in a named round. It is jointly administered — the Department of Industry, Science and Resources registers the R&D activities, the ATO processes the expenditure claim in the company return — on a self-assessment basis, and registration is due within 10 months of the end of the income year the R&D activity took place in. Under the current rates, a company with aggregated turnover under $20 million gets a refundable offset equal to its corporate tax rate plus an 18.5% premium; a company at or above that turnover gets a non-refundable offset instead, at a lower premium on R&D expenditure up to 2% of total expenditure and a higher premium above that threshold. The government has announced changes to the R&DTI starting from 1 July 2028 — worth confirming the detail with your registered agent as that date approaches, not something to plan a current-year claim around.

Sector grants for recycling and cleantech manufacturing sit on top of that and behave nothing like it. The Modern Manufacturing Initiative’s Manufacturing Integration Stream — Recycling and Clean Energy round has offered grants of $1 million to $20 million, up to 50% of eligible project expenditure, with a $2 million minimum eligible spend, but its most recent round is closed to new applications. The Industry Growth Program, whose priority areas include renewables and low-emissions technology, is currently paused to new applicants pending a program redesign. Neither status is a reason to build a plan around a program that has since closed — it is the reason to check the business.gov.au grants and programs finder for what is actually open before a pilot-plant budget gets built around a round that no longer exists.

What makes a pilot-plant run count as R&D — and what makes it a production cost

business.gov.au’s manufacturing sector guide for the R&DTI addresses this directly by naming "R&D in a production environment" as its own category, alongside worked examples that separate core R&D from the supporting and purely commercial activity around it. The line it draws matters most exactly where a sustainable-materials company spends its money: a trial run through a pilot plant to establish whether a new biopolymer formulation or a novel recycling-feedstock process behaves at scale the way it did on the bench is eligible core R&D only where the outcome genuinely cannot be determined in advance from current knowledge — a hypothesis tested by experiment, not a known process being scaled up for volume.

Running that same pilot plant to produce saleable material, once the process is understood, is production — not R&D, however novel the underlying technology still feels to the company running it. The practical consequence for a scaling materials business is that the same physical asset serves both purposes in the same month, and only one of them is R&D expenditure. That is exactly the distinction the sector guide’s production-environment examples exist to draw, and it is the one companies moving from prototype to pilot get wrong most often — not because the R&D stopped, but because nobody separated the experimental campaign from the production run on the same line.

The project-accounting record set a claim or a grant application needs

business.gov.au’s record-keeping guidance for the R&DTI is explicit that records "should be created at the time the activity is conducted," must be kept for five years after the expenditure is claimed, and must include "documents that support any apportionment methods used" — not just the total pilot-plant spend, but which dollar of feedstock, plant time and technician hours relates to the experimental campaign versus the commercial run on the same equipment. For a sustainable-materials company that means the pilot plant’s time log, the feedstock batch records and the technician timesheets need to be coded to a specific trial as the work happens, not reconstructed from memory the week before the 10-month registration deadline.

A sector grant application asks for the same discipline in a different shape: a utilisation plan tied to named commissioning and scale-up milestones, a cost allocation between R&D and eligible capital project expenditure that a reviewer can trace line by line, and matched-funding evidence where the program requires it — the same traction-and-milestone framing this engagement’s SISFS convertible-debenture proposal was built on, adapted to a program that measures eligible project spend rather than an incubator committee’s milestone schedule. CapEasy’s part is that plan, the pilot-plant time and cost ledger, and the schedule tied to the activity, month by month. The eligibility call on which pilot-plant activities qualify as core R&D, the registration with the Department, and the lodgment itself are prepared for your registered BAS or tax agent, working from the Department’s and the ATO’s guidance — the R&DTI is a self-assessment program, and a registration confirmation is not an eligibility finding.