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Evidencing your R&D claim

RECORD KEEPING

As the old saying goes, you don't get something for nothing.

Many companies accessing the R&D Tax Incentive often overlook one of the critical aspects of making a claim; record keeping.

So what is adequate record keeping for an R&D claim? What will put you in a strong position whilst minimising internal disruption? 

AusIndustry and the ATO both view record keeping as an important part of any R&D project and also an important part of good business practice. If you register for the R&D Tax Incentive you need to keep records to demonstrate the work you register is eligible for support.

Not having adequate records to evidence the work undertaken and expenses incurred may result in a claim being dismissed and the company required to payback the benefit it has accessed over a number of years.

There are two types of record keeping required for the R&D Tax Incentive:

1. ACTIVITY BASED RECORD KEEPING

Activity based records show that activities were actually carried out, and show how they are eligible core or supporting R&D activities.

The type of records that might be kept for activity based records include:

  • Notes from meetings with project and technical staff.

  • Business plans and approvals.

  • Results of background research and scoping.

  • Technical project documents, including the results of testing on the product, idea or service.

  • File notations and updated records to track the progress of an R&D activity.

2. EXPENDITURE BASED RECORD KEEPING

Expenditure based records justify expenditure claims for eligible R&D activities.

The type of records that might be kept for expenditure based records include:

  • Timesheets to verify the amount of time spent on R&D activities.

  • General ledger entries and invoices to verify the amount incurred on R&D activities and that include sufficient detail to link them to the R&D activities.

  • Spreadsheet or template that allows for eligible R&D costs to be consolidated into a format that allows for direct input into the ATO R&D Tax Incentive Schedule.

  • Financial documents including records of expenditure that include sufficient detail to link them to the R&D activities.

HERE ARE OUR TIPS ON IMPROVING R&D RECORD KEEPING:

  • Hold prospective discussions with a specialist R&D Tax advisor to identify the key opportunities for the year ahead.

  • Capture staff time spent on the project, key role and tasks at least on a monthly basis. For software development staff, development tracking systems such as GitHub may serve well.

  • Ensure any contractor invoices reference the work undertaken as R&D, or supporting R&D.

  • Capture significant technical unknowns which will require experimentation, from the outset and throughout the project.

  • Capture any failed test outcomes, test procedures, and resulting design changes.

IF YOU ARE CONCERNED THAT YOUR R&D CLAIM RECORD KEEPING MAY NOT BE UP TO SCRATCH, CONTACT US TODAY FOR A NO OBLIGATION DISCUSSION.