Update from the State Reference Group On R&D Compliance

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

At this most recent SRG, much of the discussion was focussed on the Regulator’s new ‘’streamlined’’ compliance process. This involves the review of every registration that is lodged with further compliance activity being conducted where this initial review identifies some risk of non-compliance. Where a registration is flagged for examination, a Notification of Examination and a Statement of Issues is provided to the claimant, who then has 30 days to provide the records that were generated during the course of conducting the R&D. Extensions of time to respond may be requested.

These records of substantiation are expected to evidence the ‘’experimental’’ nature of the work (i.e. show that some kind of ‘’hypothesis’’ or idea has been raised and tested and the outcomes assessed). On the accounting side, supporting documents (e.g. timesheets/ invoices etc) should show the connection between the R&D expenditure being claimed and the R&D activity that has been registered.

It is clear that the Regulators have little appetite to exercise discretion and give companies the benefit of the doubt in terms of assessing whether documentation mustered in support of a claim satisfies the burden of proof that taxpayers must meet under self-assessment.