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AFR Reports of Dispute Between R&D Entity and R&D Advisor for Liability Over Reversed R&D Claims

In early January 2021, the AFR published a story in respect of an Australian R&D Entity taking legal action against a large professional advisory firm in respect of allegations that its tax advice was below industry standards, not fit for purpose, and not undertaken with due care or diligence.

The case specifically relates to R&D Claims the Australian R&D Entity made in the in the FY14 and FY15 periods which were subject to reviews by the ATO and AusIndustry, leading to the R&D claims being rejected for not meeting the necessary criteria.

The R&D Entity is seeking damages of $220,000 in the case, which is over two and a half times more than the $83,000 paid to the professional advisory firm during the relevant part of the engagement.

Swanson Reed has no knowledge of the details in this case other than what has been reported by the AFR, and we have no view with respect to where any fault or liability may lie.

Whilst the compliance environment for R&D Claims has become more reasonable over the past 18 months (the claims rejected in this particular case fall during the peak of the widely reported “R&D compliance crackdown”), the AFR’s story does highlight the importance of:

• Ensuring claims are compiled in accordance with the latest AusIndustry and ATO guidelines;
• R&D Entities being aware of their obligations and the documentation that may be required in the event of a review;
• The process for negotiating engagements with R&D Advisors.

Swanson Reed specifically seeks to manage these issues by:

• Being forthcoming with R&D Entities about the documentation required in the event of a review. As part of our standard review process, we provide relevant extracts from current regulator guidelines to R&D Entities and seek confirmation of relevant documentation prior to claim submission;
• Processes for collaborative review of claims before submission by multiple members of our team and the R&D Entity;
• Negotiation of fees that are in line with R&D Entities’ benefit and risk.