The commissioner of taxation has been called upon to release binding guidance in relation to documentation requirements for the R&D tax incentive, as the budget looks set to deliver a “relaunch” of the popular tax incentive.
Advisers brace for 'relaunch' of R&D tax incentive
Speaking to Accountants Daily, Gilbert + Tobin tax lawyer Chris Merjane said the 2016 Ferris, Finkel and Fraser review, and the recent Innovation and Science Australia report, as well as recent comments by Treasurer Scott Morrison have all pointed in the direction of change that will most likely be revealed in the upcoming budget.
“The changes that we are more confident about are a scale-back of the R&D tax incentive to a cap of $4 million of refunds in each particular year, with a lifetime cap of $40 million and in order to claim it you have to spend on R&D at least 1 per cent of your total annual expenditure,” said Mr Merjane.
“Secondly, the increase to R&D for key collaboration areas and we anticipate that to be with research organisations and universities — there will be additional benefits undertaking R&D with those bodies.
“And the last one is better administration — this is something the adviser body group has been asking for quite a while and claimants have been asking for, which includes better plain English guidance and better administration. At the moment there's a two-agency model, so there's a bit of tension between what AusIndustry does and what the ATO does.”
Additionally, Mr Merjane believes the government needs to provide clarity on documentation requirements, considering the number of tax advisers and claimants that have been called up by the ATO.
“Taxpayers need to rely on guidance and on law and point to something in order to meet their burden of proof and meet their requirements of the R&D tax incentive,” said Mr Merjane.
“Taxpayers have to be able to look at something, check what their requirements are and meet those requirements and if the ATO comes knocking, they can point to what they've done that they've abided by law or by guidance. That's what's missing at the moment.
“What we have is a range of guidance by the ATO and AusIndustry, which provide broad brushed details on how they can be documenting things but not what they should actually be doing and nothing they can rely upon in case of a dispute. It is fundamental that taxpayers have something they can rely upon.”
Mr Merjane also believes other possible changes in the pipeline include a tightening of rules in relation to ‘ordinary business expenditure’ claims; a reduction in overall benefits available under the R&D tax incentive, including a reduction in indirect support; and a tightening of legislation in relation to software development.
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