In Ozone, the taxpayer sought review of the Commissioner’s decision to disallow the R&D Tax Offset it had claimed under the R&D Tax Concessions for the 2001/02 year in respect of its project to develop beverage purifier devices.
The AAT affirmed the Commissioner’s decision, finding the taxpayer had not substantiated the nexus between the R&D activities and the expenditure. The AAT held that the taxpayer had not:
- adopted contemporaneous record-keeping practices to capture time spent by its employees on R&D activities;
- distinguished R&D related purchases from other business purchases; and
- produced documents which could be understood by an independent expert.
This decision is the latest in a series of AAT decisions against relating to their R&D claims including RACV Sales and Marketing Pty Ltd v Innovation Australia  AATA 386, NaughtsnCrosses Pty Ltd v Innovation Australia  AAT 743 and Hadrian Fraval Nominees Pty Ltd v Commissioner of Taxation  AATA 127. The cases provide guidance on the nature and extent of record-keeping expected. The onus is on taxpayers to demonstrate that claimed activities are experimental in nature and different to ‘business as usual’.