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Company Involved in R&D Tax Dispute over Software Development Activity Now in Liquidation

Royal Wins Pty Ltd and Innovation and Science Australia [2020] was an AAT case where it was found that the company’s software development activities did not meet the requirements under the R&D Tax Incentive.

The claims were substantial and found by the AAT to not be suitably substantiated.

The AFR has recently reported that the company is now in liquidation. The AFR article notes:

• “Royal Wins, an Australian mobile developer of wagering and betting games which is listed in the US and Canada, and run out of Sydney until mid-2022, will have its Australian entity liquidated following an order last month from the Supreme Court of NSW.
• The ATO has lodged a claim in the sum of $3,225,520 and is not involved in the liquidation, other than as a creditor, at this stage.”
• Royal Wins initially registered R&D activities, but Industry Innovation and Science Australia undertook an internal review following referral from the ATO. The review found much of the activities did not constitute R&D, a decision that was upheld by the Administrative Appeals Tribunal.
• “In the decision, the [IISA] found that [Royal Wins] had not demonstrated that the outcomes of the claimed R&D activities could not have been known or determined in advance on the basis of [then] current knowledge, information or experience,” the AAT ruling said.
• “Specifically, the [IISA] found that the claimed core R&D activities involved the application of existing knowledge and expertise, including through the use of standard software testing methods.”

Whilst compliance activity of R&D Claims has become more reasonable over the past year since the Moreton Resources Case and new AusIndustry Compliance framework, this case again highlights the importance of documenting and assessing activities in accordance with programme regulator guidance.

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