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Handling the risks in claiming the R&D Tax Incentive

As the dust cloud that was the recent Federal Election settles, we welcome Greg Hunt and Craig Laundy to the Industry, innovation and Science portfolio. One imagines that a high priority for the new team will be to publish the Ferris/Finkel/Fraser report on the R&D Tax Incentive (the Incentive) and get to work on the next round of reforms to the program.

However, while those cogs turn at their own pace, companies need to continue to handle claims under the current provisions. To that end, AusIndustry and the ATO recently conducted a workshop in Sydney with a select group of R&D tax agents to share views about compliance issues. Whilst conceding that the Incentive’s legislative requirements are being generally met, the regulators detailed a series of risk areas generating compliance problems . The workshop was put forward as a significant step in identifying how the advisory community can work with the regulators to improve Incentive outcomes.

The risk areas identified are as follows:

  • Registration form inconsistencies
  • Record-keeping deficiencies
  • Ordinary business activities and whole-of-project-type claims
  • Sectors of concern – software; farming/agriculture; mining; building and construction
  • Complying with statutory and regulatory requirements
  • Meaning of ‘expenditure incurred’
  • The ‘conducted for’ test
  • Grouped entities
  • R&D consultants and advisers behaviour

In the next several weeks, the MJA Blog will address these risk areas and we will do our best to do some sorting of fact from fiction and to reassure claimants that there is still real value in accessing the Incentive. And keep an eye out for our companion piece, the MJA Update, for any policy developments as the new Government hits its stride.

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