FROM THE CHAIR OF THE R&D TAX INCENTIVES COMMITTEE DR MARLENE KANGA AM
Working together on the R&D Tax Incentive
Innovation Australia has a very positive outlook of the R&D Tax Incentive and the support it gives to innovative companies.
We have a strong view that continuing support for R&D and innovation is an imperative for Australia, so that we continue to generate successful ideas and compete in global markets.
Engaging in the programme with integrity is an obligation that all programme participants and their tax advisers need to take seriously.
While most do so, there are still some problem areas that Innovation Australia, AusIndustry and our programme delivery partners the Australian Taxation Office (ATO) are concerned about.
Companies and their tax advisers need to be careful to get their R&D Tax Incentive registrations and claims right in these areas to avoid taking compliance risks.
AREA OF COMPLIANCE CONCERN
Broadacre farming and ‘business as usual’ expenditure in R&D Tax Incentive claims
AusIndustry and the ATO are concerned that some programme participants are claiming the R&D tax offset for expenditure that does not relate to R&D activities. Rather this expenditure would seem to be appropriately classed as ‘business as usual’ in its nature and not experimental within the requirements of the legislation.
To address these concerns, the two regulators have collaborated over the development of a Taxpayer Alert and media release.
FROM R&D TAX INCENTIVE GENERAL MANAGER DAVID WILSON
Common errors with registrations and applications for findings
The R&D Tax Incentive is now well into its fourth year of operation and has an R&D tax support pedigree stretching back into the 1980’s - the R&D Tax Incentive is not a new programme. It is very positive to see the strong majority of participants appropriately registering with the programme and going on to claim their tax offsets to support genuine R&D. However, despite the maturity of the programme AusIndustry still sees a small but worrying number of registrations and applications for finding that apply the law incorrectly. These registrations are prepared by both companies and registered tax practitioners.
FROM R&D TAX INCENTIVE INTEGRITY ASSURANCE MANAGER ANDREW LEWIS
Ensuring the integrity of the R&D Tax Incentive – for advisors
The R&D Tax Incentive came into effect for income years commencing on or after 1 July 2011. The new legislation took the eligible activity definitions of the previous R&D Tax Concession programme and made some changes to ensure that only genuine R&D would be claimed.
Most tax practitioners provide professional and positive support to companies which enables them to correctly self-assess and claim. However, despite the growing maturity of the programme AusIndustry is concerned that some tax practitioners are providing advice to companies that is not consistent with the legislation, either in its intent or in its letter. This is despite AusIndustry’s guidance-led delivery which includes proactive stakeholder engagement activities such as education workshops, the dedicated ‘Snapshot’ website and a comprehensive suite of guidance products.
FROM R&D TAX INCENTIVE INTEGRITY ASSURANCE ASSISTANT MANAGER ADRIAN WILSON
Ensuring the integrity of the R&D Tax Incentive – for companies
Record keeping obligations
The R&D Tax Incentive is a self-assessment programme – companies assess for themselves the eligibility of their R&D activities and associated expenditure. But with the responsibility to self-assess eligibility is the accompanying obligation to keep adequate records to substantiate the correctness of your self-assessment.
If you claim the R&D Tax Incentive, your records must show that you carried out eligible R&D activities and incurred eligible R&D expenditure in relation to those activities.
It is also your responsibility to satisfy the ATO that you use reasonable methods to differentiate between your expenditure on eligible and non-eligible R&D activities.
REMINDER FOR BUSINESS
R&D Tax Incentive Snapshot
Don’t know much about the R&D Tax Incentive? Or know a business that wants to learn about the programme? The R&D Tax Incentive Snapshot is the perfect place to start.
As the name implies, it’s a ‘Snapshot’ of the benefits, eligibility requirements and how to apply, and also includes customer testimonials and industry sector case studies to help you start in the right direction.