Global

Details

  • Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 10/15/2013

Australia - Documentation of R&D activities is critical 

October 15: A decision of the Administrative Appeals Tribunal (AAT), representing a shift in the AAT’s approach to mining claims, has broader implications for all companies that conduct research and development (R&D) activities in a production environment.

Consistent with other recent AAT decisions, the generation, collection, and retention of strong documentary records to evidence R&D activities and associated expenditure is critical to sustaining R&D claims.


Also, R&D activities must be distinguishable from those conducted for only production (or non-R&D) purposes.

Contemporaneous documentation

Contemporaneous documentation demonstrating the “experimental” nature of the R&D activities remains key. In brief, companies claiming R&D activities must retain:


  • Documentation identifying the knowledge gaps and technical unknowns that the R&D will explore (with reference to pre-existing technology at the time of the project’s commencement)
  • Evidence of initial hypotheses and the purpose underlying the R&D activities, and how those may have changed over the course of the project
  • Records of trials or experimentation undertaken to test hypotheses, results generated, analysis undertaken, and any conclusions reached

Taxpayers that undertake R&D activities but do not produce or retain strong evidence of those activities may see any R&D claim disallowed, whether under the old R&D rules (for claims prior to the 2012 income year) or the new R&D tax incentive.


Read an October 2013 report prepared by the KPMG member firm in Australia: Substantiation remains key for R&D tax claims




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