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MJA Updates

The RDTI: All Quiet On The Fiscal Front

May 9, 2023 Kris Gale

This week’s Federal Budget had nothing of moment to say about the Government’s flagship innovation program, the R&D Tax Incentive (RDTI).

Whilst Australian taxpayers are always keen for additional support and encouragement, the stability of the current unchanged program does enable companies to make their R&D and innovation plans with a high degree of certainty. It should be remembered that the now well-established definitions of eligible R&D activities and expenditures have not changed since they were introduced in 2011 and this should add to the confidence of those claiming appropriately.
 
Budget Announcements Of Note
 
The Albanese Government has announced more than $500 million in the science and industry space.
 
The major component of this investment is the new $392 million Industry Growth Program.
 
This program will offer advice and grants to start-ups and small-to-medium businesses to help them commercialise their ideas and grow with a view to expanding the pipeline of investment-ready projects for the $15 billion National Reconstruction Fund to consider when it comes online.

Other notable announcements included the expansion of the instant asset write-off for another year, help for small businesses to adopt and adapt to digital technology, along with energy relief and green energy programs that had been previously already announced.
 
What Now For The RDTI?

While there was no movement in the Budget on the RDTI, this doesn’t mean that the program is in stasis.
 
A recent round of meetings of the RDTI Stakeholder Reference Groups, which have replaced the former State Reference Groups, highlighted the main issues that currently surround the RDTI from the perspectives of AusIndustry and the ATO:

  • Associate Payments

Taxpayers are advised to not include expenditure incurred with a related or connected business on eligible R&D until it is constructively paid. 

  • The “Conducted For” Test

The RDTI is only claimable by the business the R&D is conducted for (unless it is conducted for a foreign-related business). That business must bear the uncertainties inherent in the experimental outcomes and have an expectation of benefitting from the successful completion of the R&D.

  • The Competent Professional Test

This is an unlegislated indicative test whereby AusIndustry expects to see reasonable evidence of investigations by the taxpayer of the need to conduct the experiments because their outcome was unknown. This includes evidence of enquiries as to the level of accuracy and certainty required to develop new or improved products and processes. 

This is a space to watch closely as some AusIndustry guidance has occasionally strayed into suggesting that the taxpayer needs to possess omniscience of all available knowledge on a worldwide basis and to be able to demonstrate the same in a risk assessment or audit situation.

More recent commentary has sheeted this test back to one based on reasonableness and MJA supports that position. 

Should you wish to discuss this matter please do not hesitate to contact Kris Gale on 02 9810 7211 or email kris.gale@mjassociates.com.au


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