March 18th, 2019
CBA have announced to the ASX on 18 March that they have entered into a settlement in respect of a tax dispute regarding the eligibility of claims for software development R&D activities.
Below is an extract from the ASX announcement:
- Commonwealth Bank of Australia has agreed to withdraw from all current proceedings with the ATO and Innovation and Science Australia (ISA) before the AAT in respect of the eligibility of R&D claims that were made for the years ended 30 June 2012 and 30 June 2013 relating to the CBA core banking modernisation project that involved digital transformation and software development;
- The agreement does not results in material impacts to CBA’s current or future year financial results;
- CBA will continue to work collaboratively with the ATO and ISA in relation to future registration of eligible R&D Activities;
The claim amount has not been disclosed in the announcement, however some media outlets have reported disputed R&D expenditure to be in the “nine figure range.”
Whilst very large claims for software development R&D activity will naturally attract scrutiny, the settlement is a timely reminder that software claims are often reviewed with respect to:
- Ensuring compliance with the definition of Core and Supporting R&D activities;
- Ensuring that only eligible Core and Supporting R&D Activities within a platform are claimed (not all software development activities within a platform);
Registrations of software development activities should take care to review the latest AusIndustry guidance released in February to ensure they are kept up to date with compliance expectations of the programme regulators.