R&D Tax are doing it wrong!

common mistakes with the R&D tax incentive

Over the last few months we have worked with a large number of companies that had previously accessed the R&D Tax Incentive program either internally or through external consultants 'specialising' in this space.

We have found that companies/consultants are not getting things right with regards to specific areas within the R&D Tax Incentive.

Here are the top 10 things we have found:

1. Lack of sufficient detail in the AusIndustry R&D Registration Form which would enable an assessor to conclude R&D activities have been undertaken, minimising audit risk. 

2. Confusing experimentation with the product concept/market acceptance with experimentation to address technical or scientific knowledge gaps.

3. Misunderstanding the scope of activities that may qualify as R&D and associated expenditure that is claimable.

4. Not having the right structures or agreements in place to be able to claim the R&D Tax Incentive.

5. No focus on underlying substantiating documentation that links/evidences the R&D activities claimed and expenditure incurred. A key audit focus/risk area.

6. Thinking the current rate of the R&D Tax Offset is 43.5%.

7. Not understanding the definition of 'aggregated turnover', which is calculated on a group basis and determines the rate of R&D Tax Offset and refundability (ATO link).

8. Not understanding the 'for whom' (ATO link) and 'at risk' (ATO link) requirements which can dictate whether a claim can be made and the scope of a claim.

9. Thinking all software development qualifies and/or inappropriately making whole of project claims, a high risk area AusIndustry and the ATO are focusing on. 

10. Not using a consultant that is a registered tax practitioner, or that understands the nature of the scientific/technical activities undertaken.

A recent Innovation Australia update echoes some of these concerns and can be found here.

With great pride I can say we have been successful in tendering against 'Big Four' providers, and incumbent mid-tier firms based on our specialised software and technology industry R&D Tax expertise.

We have been able to significantly improve claim outcomes, efficiency, and minimise risk. Part of this involves applying a 'real time' assessment and substantiation approach. Something which is uncommon amongst R&D Tax consultants who often review/prepare a claim retrospectively. 

We offer existing claimants a no obligation, free "Health Check" review. This can provide you with peace of mind and comfort surrounding existing claims. 

It is carried out at no cost to you.