R&D Tax Incentive...you 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.

TALK TO US TODAY ABOUT HOW WE CAN MAKE OUR EXPERTISE WORK FOR YOU: info@rsfconsulting.com

The R&D Tax Incentive, is it time for a Health Check?

The Balanced Risk

To kick off our blog, I thought I would discuss the balanced risk associated with accessing the R&D Tax Incentive program. 

The R&D Tax Incentive program is a tax based program which companies are entitled to claim each year.

It is not a Grant. It is self assessment much like a company's income tax return or an individual's income tax return. A positive is that you have more short term certainty that any funding will be received. However, longer term, claims may be audited, and there is the risk that a company may have to pay back amounts received including interest and penalties, if applicable.

Just because you have been receiving funds under the R&D Tax Incentive for a number of years successfully does not mean that claims made have been accepted as valid. In fact, the longer you have been claiming under the program, the higher the risk of an AusIndustry or ATO review occurring.

AusIndustry reviews are common, with a company typically reviewed once every four years. Greater focus is typically placed on first year claimants, and particular claim types such as software development. ATO reviews are increasing. Key focus areas include refundable R&D Tax Offset claims, software development claims, and legislative integrity provisions such as "payment to associates". 

Contemporaneous substantiating documentation is critical and sought by both regulators.

From successfully passing a review, comes greater comfort. 

SO ARE YOU AUDIT READY?

At RSF Consulting, we offer claimants a no obligation, free "Health Check" review. This can provide you with peace of mind and comfort surrounding existing claims. The review will look at past claims focusing on:

• claim risks and recommendations on how these may be reduced,

• where additional value exists, which may be accessed, and

• where the process of making a claim can be made more efficient.

This is carried out at no cost to you. The process does not require significant input from company personnel, and focuses on reviewing existing claim related documentation.

TALK TO US TODAY ABOUT HOW OUR “HEALTH CHECK” CAN WORK FOR YOU.