January 29th, 2024
The Australian Taxation Office (ATO) has in recent months published information around publication of Research and Development (R&D) expenditure claimant information.
An additional update was provided by the ATO in late January 2024 which notes:
- The annual Research and Development tax transparency reporting will publish information about R&D claims;
- Each year, the ATO will publish:
- the required information on data.gov.au;
- the ATO’s contextual analysis – the R&D tax transparency report – on the ATO website.
- The information the ATO will publish is the:
- name of the R&D entity claiming the R&D tax incentive;
- entity’s Australian business number (ABN) or Australian company number (ACN);
- entity’s total expenditure on R&D (known as total notional deductions claimed – label Z in Part A of the R&D tax incentive schedule) less any feedstock adjustments (label B in Part B of the R&D tax incentive schedule).
- The ATO will base this on information within the R&D Entity’s lodged (or amended) income tax return for the period;
- The ATO are now required to publish the R&D information 2 years after the end of the financial year. The ATO have noted that the first publication will be as soon as practicable after 1 July 2024 for the income year ending 30 June 2022. They expect to first publish this information in September 2024 and then on an annual basis.
- The first report will apply to companies that lodged a company tax return with an R&D tax offset and their income year began on or after 1 July 2021.
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 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 on 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.