Taxpayers seeking to utilise the R&D tax incentive has been urged to have contemporaneous documentation in light of increase audit activity by both the ATO and AusIndustry.
R&D audits increase, documentation key for accountants
Speaking at HLB Mann Judd’s client seminar, Holding Redlich partner, Damien Bourke said companies engaging in R&D activity would need to be aware of an increase in audit activity, following the introduction of proposed changes last month.
“The key message is to be audit-ready because you will be audited. In the current round of amendments, the government is also beefing up the AusIndustry and the ATO to conduct more reviews because they think there is more out there to be reviewed and there is going to be a lot more audit activity coming,” said Mr Bourke.
“The fact is if you have the documents or start making records anytime you have the opportunity or you have the knowledge, then you’ll be far better placed than if you try to make the records once you are under review or under alert by the ATO.
“It doesn’t have to be anything sophisticated, all it needs to be is contemporaneous and it just needs to be done by people involved in the activities.”
Further, Mr Bourke said disputes brought to the Administrative Appeals Tribunal (AAT) often go in favour of AusIndustry simply because of the lack of documentation.
“Ninety per cent of the time AusIndustry wins and 90 per cent of the time it is a default win because they never get to the point of asking whether it’s R&D or whether it is innovative or whether it is experimental because of the simple fact that, as the claimants, we have the onus of proof, just as in tax cases, and that onus is 50.001 per cent so you don’t need too much, you don’t have to prove beyond reasonable doubt like in a criminal proceeding,” said Mr Bourke.
“All you need is to have contemporaneous documents.”