Regulators Share Insights on New R&D Incentive Compliance Approach

AusIndustry and the ATO recently convened and jointly hosted a State Reference Group (SRG) meeting. SRG forums provide select R&D tax advisers an opportunity to discuss program administration and operational matters with regulators. NOAH is a foundation SRG member and regular participant.

Streamlined R&D Incentive Compliance Process

At this recent SRG, much discussion focused on the regulators’ new “streamlined” R&D Tax Incentive compliance process. This involves reviewing every registration lodged, with further compliance activity where the initial review identifies non-compliance risks.

Notifications of Examination for At-Risk Claims

Where a registration raises flags, a Notification of Examination and Statement of Issues is provided to the claimant. They then have 30 days to supply substantiating records generated during R&D activities. Extensions may be requested.

Rigorous Substantiation Requirements

These records must evidence the “experimental” nature of the work, like showing a hypothesis was tested and outcomes assessed. Accounting records should connect claimed expenditures to registered R&D activities.

Regulators Showing Little Flexibility

It’s clear regulators have little appetite to exercise discretion and give companies the benefit of doubt when assessing if documentation satisfies the taxpayer’s burden of proof under self-assessment.

Implications for Companies Claiming R&D Incentives

The regulators’ rigorous approach reinforces the importance of having robust processes for documenting R&D activities as they occur. Claimants should also engage specialised advisers to help navigate compliance requirements.

With potential examinations on the rise, thorough recordkeeping and guidance from experienced consultants is key to substantiating claims. Contact NOAH Connect as your partner in maximizing R&D Tax Incentive benefits under the new compliance environment.