Australia

Details

  • Service: Tax, R&D Incentives
  • Industry: Industrial Manufacturing
  • Type: Business and industry issue, Regulatory update
  • Date: 25/07/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Paul Van Bergen

Paul Van Bergen
Partner, Tax

+61 2 9455 9373

pvanbergen@kpmg.com.au

R&D tax incentive – ATO and AusIndustry compliance focus 

by Paul Van Bergen, R&D Tax Incentives Specialist

The R&D Tax Incentive is jointly administered by the ATO and AusIndustry (on behalf of Innovation Australia). Ausindustry has responsibility for the eligibility of R&D activities whilst the ATO takes responsibility for R&D related expenditure. We have observed increasingly closer cooperation between the ATO and AusIndustry. In its on-line Compliance in Focus 2013-14 publication, the ATO has signalled continuing focus on the R&D tax incentive.

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:
    • contracts
    • 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.
 

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