The ATO announced it will work closely with AusIndustry to ensure taxpayers apply the R&D activities definition including:
- whether a given software development is for the dominant purpose of internal company administration or not
- testing to ensure there is a direct link between the registered R&D activities and expenditure being claimed.
The ATO will identify expenditure between associates and look to ensure amounts have been paid and that there are no mark-ups between connected or affiliated entities.
AusIndustry guidance suggests that during its compliance reviews, the list of evidence assessors will request includes:
- project planning documents (and an extensive list of experimental records)
- other project documentation (some of which typically falls within the ATO’s ambit) such as:
- records of resources allocated to the project, e.g. asset usage logs
- staff time sheets
- tax invoices.
Given the announced increases in review activity by the ATO and AusIndustry, best practice should include back-up copies of such documents at the time and review of documentation at project completion to ensure companies can evidence their R&D claim.