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