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ATO Issues Warning on R&D Claims for Farming Activities

The Australian Tax Office and AusIndustry have issued guidance to alert companies against claiming the R&D tax incentive for business-as-usual farming activities.

Expanding on this, ATO Deputy Commissioner Tim Dyce said that usual business expenditure is normally not eligible under the incentive and the law contains a number of requirements which must be satisfied in order for activities to be accepted. He further explains, “we’re seeing farmers applying soil treatments across their property, in some case thousands of hectares, which is an activity more consistent with commercial production rather than R&D. In many cases the fertilizers that are being used are established ‘off the shelf’ products whose application produces outcomes which are already known.”

In relation to this, Innovation Australia has found certain claims for such activities do not meet eligibility requirements by law. These matters are currently being tested legally in the Administration Appeals Tribunal. The ATO and AusIndustry are also concerned that other entities in the farming industry may be erroneously claiming the R&D tax incentive under similar circumstances.

As a result, the ATO and AusIndustry will screen registrations for activities that are comparable to those described in this alert and will instigate compliance activities accordingly.  Consequently, the ATO suggests affected taxpayers may want to consider seeking independent professional advice. Taxpayers who seek advice on the eligibility of their R&D Activities are able to contact a Swanson Reed specialist adviser for guidance.