R&D Tax Incentives Program

Important notes for those who have or are applying for the R&D Tax Offset claim

OVERVIEW

• Be aware that AusIndustry and ATO are increasingly conducting reviews of the R&D offset claims.
• Ensure that you have claimed the right expenses.
• Ensure that you have kept proper records to meet the record-keeping requirements.

AUSINDUSTRY AND ATO AUDITS

The R&D incentives program has strict application requirements and is closely monitored and audited by AusIndustry and ATO.

Back in 2016, Airtasker was among one of the highest-profile companies to be asked to pay back large sums of money following an ATO audit into the use of R&D incentives. According to its CEO, Tim Fun, when both AusIndustry and ATO randomly reviewed Airtasker, although ATO agreed to their governance processes, AusIndustry instigated a further formal Request for Information (RFI) process. Two years later, Airtasker was required to repay to the ATO 100% of the R&D incentives that were provided over a number of years of participation in the program.

To ensure that R&D claims are validly made, the ATO often undertakes targeted audits and reviews of R&D claims (both pre and post their issue). This includes ensuring taxpayers are able to substantiate how the expenditure they have claimed was incurred on R&D activities.

CLAIM THE RIGHT EXPENSES

As the R&D Tax Incentive is a self-assessment program, you need to ensure your application for registration and your claim are correct. You must provide accurate information to the Department of Industry, Science, Energy and Resources (the department) and to the Australian Tax Office (ATO). The ATO may also check if the R&D costs you claim are eligible.

RECORD-KEEPING REQUIREMENTS

You are responsible to keep records that show your activities meet the eligibility criteria as defined by the law.

A key requirement is that companies keep adequate records at the time you carry out your R&D activities (known as contemporaneous records) to demonstrate to both AusIndustry and the ATO that the requirements are met. Records must generally be kept for a minimum of five years and a failure to do so may mean that R&D Offsets must be repaid, and penalties may be imposed in certain circumstances.

You may make further notes to support your original records at the later date, but documents created after activities are carried out are generally inadequate on their own.

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References:
→ https://www.business.gov.au/Grants-and-Programs/Research-and-Development-Tax-Incentive#eligibility

→ https://www.accountantsdaily.com.au/tax-compliance/12422-r-d-audits-to-see-businesses-forced-to-pay-back-millions