ATO publishes DIS on AAT decision in GQHC and Commissioner of Taxation re: ATO assessment of eligibility of R&D Activities

May 1st, 2024

ATO decision impact statements (DIS) are documents which seek to advise the community of the ATO’s view on the implications of a particular court or tribunal decision. The statement provides information for taxpayers and advisers.

The AAT decision of GQHC and Commissioner of Taxation (Taxation) [2024] AATA 409 was handed down in February 2024 and the ATO decision impact statement was published in April 2024.

The matter is complex, and broadly involves whether the ATO may have the power to deny the eligibility of self-assessed R&D Activities (which is usually within the jurisdiction of AusIndustry) in situations where AusIndustry cannot or has not determine the eligibility of the activities.

The case in question, GQHC, saw the AAT support the ATO’s view that it holds the authority to assess the eligibility of registered R&D activities, even when AusIndustry cannot or has not, made a binding finding. In its decision, the Tribunal concluded that the activities under scrutiny did not qualify as eligible R&D activities. In addition, implications of feedstock adjustment provisions were considered.

The ATO’s DIS on GQHC notes:

  • The decision confirms the Commissioner’s view that where the Board has not made a Finding, the Commissioner has the power to make decisions about the eligibility of an R&D entity’s registered activities;
  • Although the Commissioner has that power, where as part of ATO audit or review there are concerns about the eligibility of an R&D entity’s registered activities, it has been the Commissioner’s practice to refer matters to the Board for them to conduct an examination of the entity’s registered activities towards making Findings. This practice will continue in the ordinary course of the Commissioner undertaking compliance work on R&D tax offset claims;
  • Where the Board has not made a Finding and it is not practical or possible for the Board to examine an R&D entity’s registered activities and then make a Finding which binds the Commissioner within the section 355-705 time limits, there may be circumstances where it is appropriate for the Commissioner to make a decision about the eligibility of an R&D entity’s registered activities, or to put the R&D entity to proof as to the eligibility of its registered activities before the Tribunal or Courts;
  • The Tribunal’s decision is consistent with the Commissioner’s view as to the requirements for an activity to be a core R&D activity under section 355-25. This will assist the Commissioner in conducting compliance work and making referrals to the Board.

This AAT decision underscores the importance of maintaining detailed and contemporaneous records for companies seeking to claim the R&D tax offset. The ATO’s statement emphasises that such documentation is crucial for substantiating R&D claims and ensuring compliance with the eligibility requirements set forth in Division 355 of the Income Tax Assessment Act 1997.

The full Decision Impact Statement can be accessed through the ATO’s official website.

You can find the Decision impact statement at: GQHC and Commissioner of Taxation

Please get in touch with our office if you require assistance, would like to speak to someone about a potential claim, or check out our website for more information.

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