The ATO yesterday issued TA 2017/2 and TA 2017/3, which serve as warnings to those who are seeking to deliberately exploit the Research & Development (R&D) Tax Incentive program or are not taking appropriate care with their claims.
Those who are found to be deliberately doing the wrong thing are at risk of legal action being taken against them, the ATO said.
The R&D tax incentive was designed to encourage companies to engage in R&D, by providing a tax offset for eligible R&D activities.
Thousands of Australians have taken advantage of the incentive. In 2013-14, more than 13,700 entities spent a combined $19.5 billion on R&D, claiming a benefit of around $3 billion.
“The alerts are designed to clarify what can and cannot be claimed, and help businesses to avoid mistakes such as ordinary business activities being self-assessed as R&D activities,” said ATO deputy commissioner Michael Cranston.
“While most do the right thing, we are seeing some businesses in these industries and their advisers improperly applying for the tax incentive where the activities and expenditure claimed don’t match with legislative requirements.
“For example, we have seen an increase in claims for ordinary business activity expenses, or for large parts of projects that do not correspond to the scale or scope of experimental activities. Ordinary business activities are not generally carried out with a purpose of generating new knowledge. We often see issues including claims that encompass whole of projects (where project management, environmental and commercial risks are mistaken for technical risks) and where the activities use existing knowledge and expertise.”