AAT decision - DZXP, KRQD and QJJS

AAT dismisses application for review because applicants were subsidiaries of MEC groups.

In December 2012, three companies each lodged applications for overseas findings for activities undertaken in a joint venture for the 2012, 2013 and 2014 income years.

Innovation and Science Australia examined the applications and found that none of the activities were eligible for the R&D Tax Incentive. The applicants did not accept the decisions and sought reviews by the Administrative Appeals Tribunal.

The Tribunal decided that reviewing the eligibility of the activities would not serve any purpose. It found the companies that submitted the finding applications were not the companies that were entitled to findings.

The companies had incorrectly declared in the overseas finding application forms that they were not members of a MEC group, or that they were the head company of a MEC group. These errors misled Innovation and Science Australia when it made the overseas findings. The errors meant the findings had no effect because the companies were never eligible to apply in their own right for a Finding. The Tribunal found that it did not have the power to correct these errors.

There are special rules in the R&D Tax Incentive for MEC groups that state that only the head company can register and claim. Subsidiary companies of a MEC group cannot apply in their own right for the R&D Tax Incentive. Any otherwise eligible activities they are undertaking may be registered and claimed by the head company. This also means that only the head company can apply for advance and overseas findings.

The case illustrates that care must be taken when filling out application forms for the R&D Tax Incentive. Companies that do not pay attention to the requirements may not be able to claim the benefits.