The Administrative Appeals Tribunal (AAT) is an independent body that can review decisions Innovation and Science Australia makes about R&D Tax Incentive applications and registrations.
Typically, the AAT will only be asked to review a decision after the department conducts an internal review of the decision and the affected party remains unsatisfied.
When conducting reviews, the AAT makes decisions about the interpretation and application of the legislation that governs the R&D Tax Incentive. It is important for programme participants and their advisers to understand the AAT decisions that have been made in relation to the R&D Tax Incentive programme because they can provide useful interpretive guidance.
The following are a selection of recent AAT decisions:
- AAT decision that supports the departmental position that applicants must keep accurate evidence of claimed R&D activities that are registered through the R&D Tax Incentive.
- The key aspects of the Tribunal’s decision are:
- Applicants must demonstrate evidence of claimed activities;
- Applicants cannot seek to change their activities at the Tribunal – they are constrained to the activity descriptions as registered; and
- Pursuing an innovative idea will not, on its own satisfy the requirements for an eligible R&D activity.
- AAT decision under the R&D Tax Concession in a production mining environment that the claimed:
- modification and testing of on an existing density media sampling prototype device were only tinkering around the edge, and were not conducted for the purpose of acquiring new knowledge
- activities to trial a refined waste oil and diesel mix were not conducted in a systematic manner, did not involve innovation or high levels of technical risk, and were not conducted to acquire new knowledge
- activities to design new excavator buckets were not systematic, experimental or investigative.
- AAT decision to dismiss applications for review because the wrong companies submitted the overseas finding applications.
- If a finding is made on an overseas finding application incorrectly submitted by a subsidiary member of a multiple entry consolidated (MEC) group, the finding is not valid.
- A review of the activities submitted by the wrong company by the Tribunal will not serve a purpose because the finding application was not valid.
- The Tribunal does not have the power to substitute company names on a finding application or a finding to correct the companies’ errors.
- AAT decision considers that extensions to register late applications are only available in limited circumstances.
- AAT decision affirmed that the applicant entity must itself have the purpose of generating new knowledge.
- The purpose of generating new knowledge must be a substantial purpose.
- AAT decision found that if there is no contemporaneous evidence that an activity was conducted to meet all the eligibility criteria, then that activity is not eligible.
- AAT decision reinforced the need for businesses that claim the R&D Tax Incentive to keep good records of their R&D expenditure. This case was in relation to a registration under the R&D Tax Concession.
- AAT decision that upheld a decision by the Commissioner of Taxation to reject an entity's R&D Tax Concession claim because it could not substantiate the claimed expenditure.
- Activities must be for the significant purpose of generating new knowledge.
- Regarding technical outcomes – the project being ‘complex’ is not sufficient.