Incorrect R&D claims in the ATO’s sights

The Australian Taxation Office (ATO) and Department of Industry, Innovation and Science (DIIS) are continuing their joint efforts to curb the incorrect use of the Research & Development (R&D) Tax Incentive program with the release of a further two taxpayer alerts.

Speaking on behalf of the ATO, Deputy Commissioner Michael Cranston said that these new alerts related to behaviours noticed in the agricultural, software and IT industries where ordinary business activities were being incorrectly claimed as R&D activities and R&D expenditure.

“These taxpayer alerts are a continuation of our efforts to work with industries involved in R&D to ensure their claims are valid, and through compliance activities and legal actions, address businesses and advisors deliberately doing the wrong thing,” Mr Cranston said.

“We acknowledge that the vast majority of people claiming this tax incentive are doing the right thing. We are focussing our efforts on the small number of people who are deliberately trying to exploit the system.”

“There are various examples of improper activity we are seeing within these industries. For example, within the agricultural sector we are seeing some operators claiming ordinary farming activities which produce crops as R&D activities and expenditure.”

Mr Cranston said there were also examples in the IT sector where the ATO has seen companies trying to claim ordinary business activities, such as the regular development of new software, as research activities.

“The law states that research activity needs to genuinely be generating new knowledge. We will work with organisations that have made honest mistakes to help them rectify these errors, but are also concerned that a small number are deliberately doing the wrong thing.”

The release of these alerts today follows the release of two taxpayer alerts issued earlier this month which looked at specific concerns within the building and construction industry, as well as providing clarification for a wide range of businesses incorrectly claiming ordinary business activities against the R&D tax incentive.

To support companies and their advisors, the ATO and DIIS have published a range of materials online. These materials outline how to correctly apply for the tax incentive and maintain the right documentation to support a claim. They will also help businesses who may be unsure of their position, or who may make honest mistakes

 

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