At the end of last week, DISR released its new RDTI online application form. In this MJA Update, we summarise the new features of the application and, in a second Update to be published later this week, we will look at what the new application means in terms of program compliance and associated costs, along with the impact it is likely to have in the audit environment.
Many have noted that the portal online environment is yet to settle down and some browsers are not able to access the new format.
The following is a summary of the changes:
The new RDTI application form introduces expanded compliance requirements, including detailed disclosures on IP ownership, financial responsibility, documentation practices, and international R&D arrangements. Compared to the old form, the new version increases the number and size of input fields: at the project level from 1 box of 1,000 characters to 4 boxes of 4,000 characters; at the core activity level from 6 boxes (4 × 4,000 and 2 × 1,000 characters) to 8 boxes of 4,000 characters; and at the supporting activity level from 2 boxes of 1,000 characters to 3 boxes of 4,000 characters. There are also a substantial number of new questions across all sections.
Turning to the specific sections of the form, some of the major changes include the following:
- EMPLOYEES – The applicant must now disclose the number of independent contractors engaged in R&D activities.
- FINANCE – There is an added question that requires the applicant identify the most recently completed income year.
- PROJECTS – The applicant needs to declare how much the R&D Tax Incentive influenced the business to do the R&D. You need to describe documentation practices, disclose whether the majority of R&D occurred outside the main business address, and provide details about the R&D site and facilities. You also have to define how you have beneficial ownership of the proposed R&D activities – you must demonstrate how you effectively will own the know-how, intellectual property or other results arising from the project; have control over the direction and conduct of the R&D activities; and bear the financial burden of carrying out the activities.
- CORE ACTIVITIES – There are separate obligations to describe each core R&D activity, identify who performed it and under what arrangements (including whether it was conducted under agreement with an overseas affiliate), and explain why the outcome could not have been known in advance including explanations of what sources were investigated and information found in pursuit of establishing the outcome of each core R&D activity was not known. You also have to declare if you have evidence of experimental revisions as a result of prior experiments. The total core activity cost is now split between R&D expenditure in the prior period, the current period, Year+2 and Year+3. Future potential core R&D activities that are still being defined by preliminary investigations now require a full description of hypotheses, experiments, how they will be conducted and anticipated costs.
- SUPPORTING ACTIVITIES – You now need to describe the evidence retained and how this demonstrates that it supports the core R&D.
The new emphasis in the online application on future R&D activities and R&D expenditures is reflected by the fact that it appears that many of the questions have been lifted without alteration from the current Advance Finding application form. This observation will form part of the analysis that will be forthcoming in the second MJA Update that will be made available later this week.