ATO Release Information Around Public Disclosure of R&D Claimant Information

In a significant shift in administration, the Australian Taxation Office (ATO) has this month published information around publication of Research and Development (R&D) expenditure claimant information.

This move forms part of the administration changes to the Research and Development Tax Incentive (R&DTI) program initiated on 1st July 2021, which arose out of the previous government’s major reforms to the R&D Tax Incentive which passed with bipartisan support in October 2020.

The rationale behind the change is to enhance transparency and accountability.

The first ATO disclosure will take place in September 2024 and include the information of entities who made a claim in the 2022 income year (for income years that commenced on or after 1 July 2021).

The information to be made available to the public includes:

• Entity Name: The name of the entity that has claimed the R&D tax incentive;
• ABN or ACN: The Australian Business Number (ABN) or Australian Company Number (ACN) associated with the entity;
• Total R&D Expenditure: This is referred to as the total notional deductions claimed; and can be found under label Z in Part A of the R&D tax incentive schedule. It will be the total expenditure on R&D minus any feedstock adjustments (label B in Part B of the R&D tax incentive schedule).

The figures published will be based on the data provided in the company tax return of the R&D entity. If there are any amendments to the return, the published data will be based on the amended return. In the event that the ATO makes amendments to the labels, the information will reflect the company return prior to the Commissioner-initiated amendment.

The ATO is taking steps to ensure that claimants affected by this requirement are well-informed and have the opportunity to review and correct the information that will be published in September 2024. Tax agents representing claimants whose data is set to be disclosed will also receive contact from the ATO.

The introduction of this requirement has sparked a range of opinions within the industry.

Swanson Reed has mixed views on the measure:

Benefits from the disclosure changes may include:

• • Enhanced Transparency: allows stakeholders to understand how public industry funding is being utilised;
  • Competition and Benchmarking: The mandated disclosure provides an opportunity for companies that invest heavily in R&D to take pride in their commitment to innovation, which in turn may potentially attract investors and collaborators;
  • Accountability: Some view that investment of business expenditure on R&D is part of being a good corporate citizen, and this measure may enhance accountability in this regard.

• Conversely, there are Concerns around the disclosure changes:
  • Distorted Information: Some companies that have a large R&D expenditure investment may choose not to claim R&D expenditure under the program (or not to register all expenditure) due to various reasons, including resource constraints or commercial decisions such as accumulated tax losses. The inaccurate representation caused by the mandated disclosure could lead to a distorted picture of a company’s actual R&D activity;
  • Media Scrutiny: Companies that receive significant industry assistance through the R&D Tax Incentive might become targets for media scrutiny, whether deservedly or not;
  • Privacy: Some companies may prefer that their R&D Expenditure or any details of their taxation affairs not be published;

Regardless of anyone’s thoughts on the disclosure changes, they are now the law, and stakeholders should be aware of the requirements.

We’ll keep you informed in the coming months about the implementation of this new requirement.