ATO More Stringent on R&D Tax Claims: Tips to Ensure your Compliance

“What you don’t know may actually hurt you!”

This is quite true when it comes to compliance. Qualifying for the R&D Tax Incentive program isn’t as simple as sending in some documents or checking items off a list. Don’t get us wrong; it’s one of the best benefits every business involved with R&D should consider. The key is to be able to work with a team that understands the core of your business, can dive into the details of what you do, understand your technology as well as provide you with proper guidance on what requirements to submit for AusIndustry as well as the ATO based on the nature and cost of your claim.

ATO recently put in place more rigid measures in accepting R&D Tax Incentive claims. Fraud and the misuse of funding are the gravest offenses in the program, with cases filed in court against businessmen and accountants under investigation. This results in greater scrutiny for those taking advantage of the program beyond the way it was intended.

The ATO can audit any claim that has been registered. They will check record keeping and conduct continuous compliance check for any previous claims made after the benefit/refund has been received. Even though the R&D Tax Incentive is based upon a scheme of self-assessment, there are still rigorous accountability measures built into the program.

The R&D Tax Incentive allows expenses centred and focused on Research and Development to be claimed. However, the scheme requires substantiation with documents and processes that prove the eligibility of the company’s R&D to claim the rebate. Inexperienced or non-industry focused accountants/consultants might overlook some of the steps in the main R&D process that correspond with compliance. This may not immediately affect the claim; in fact, it may even go through registration despite missing some of the details. However, the ATO, regardless if the mistakes were made due to incorrect or incomplete documentation, can impose penalties and repercussions from the audits and reviews to prevent abuse of the R&D Tax Incentive scheme.

To ensure compliance and to avoid unwanted penalties, work with an industry-focused registered R&D consultant that will involve themselves from pre-assessment to review of your R&D plans prior, during and after implementation, and who understands the documentary evidence required to support the project and expenditure. Therefore, all information will be ready to go if the reviewer knocks on your door.

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