The Saga Begins…

October 19, 2016 Sarah Lander

And no, this MJA Update is not a review of Weird Al Yankovic’s Star Wars parody of Don McLean’s American Pie entitled “The saga begins”, nor is it a critique of an American soap opera, it is in fact a direct quote from the recent AAT decision on the R&D tax program (Silver Mines Limited and Minister for Infrastructure and Regional Development [2016] AATA 707).

The saga relates to an application made by a company to be granted an extension of time for an R&D tax claim for two income years.  (R&D tax claims are required to be made within 10 months of the end of the relevant income year.)  The company argued, inter alia, that its tax agent’s failure to advise them that the R&D tax program existed had created the circumstances by which Innovation Australia (now ISA or Innovation Science Australia) should have granted the company an extension of time.  The application related to both the R&D Tax Concession and R&D Tax Incentive programs; programs where Innovation Australia had a discretionary power to allow for late registrations.

After Innovation Australia denied the company an extension of time for both income years, the company then appealed to the AAT for the decisions to be reviewed.

Some of the evidence provided to the AAT was contradictory and, based on the reasoning, it did not appear that the company’s witnesses were entirely reliable.

The Deputy President of the AAT, Professor Deutsch, ultimately found that the circumstances did not exist to warrant Innovation Australia applying its discretion and, further, the Deputy President found that the company played a “very substantial” role in the circumstances that led to the delay in registering.

The core of the decision, as it relates to claimants of the R&D Tax Incentive (the Incentive), is that;

an act/omission/event that leads to the need for an extension of time to register R&D activities cannot be the fault of the applicant; and
that act/omission/event cannot be within the control of the applicant.
Essentially, it confirms what we have always thought about how applications for extensions would be managed; it is a discretion and will be granted only when the delay is truly outside the control of the company. For any company seeking to gain an extension of time for the registration of their R&D activity(ies), reference should be made to the Guide on the Incentive as to the types of acts/omissions/events that would give rise to ISA allowing an extension of time to register activities (including, breakdown of record keeping systems, accidental destruction of records, unavailability of key company personnel).

Now we will leave you to get back to your lives and we hope this Update has not left you singing a Weird Al Yankovic song to yourself.

Should you wish to discuss this matter further, please do not hesitate to contact
Sarah Lander on 02 9810 7211 or email sarah.lander@mjassociates.com.au