Home » News » LAKES OIL NL Provides Update on R&D Tax Activities Found Ineligible

LAKES OIL NL Provides Update on R&D Tax Activities Found Ineligible

September 25th, 2023

A recent AAT Decision dated  26 April 2023 (LAKES OIL NL and INNOVATION AND SCIENCE AUSTRALIA (Taxation) )  found a company’s registered activities were not eligible under the R&D Tax Incentive.

The project under scrutiny in the case was entitled “Project 1 – LAK2006 ‘Hydraulic Fracturing Technology for Gippsland Tight Gas’”.

The dispute was focused on a registration in the FY14 and FY15 period.

During the case INNOVATION AND SCIENCE AUSTRALIA contended that:

  1. the activities undertaken were not experimental activities;
  2. almost all of the activities fall within an exclusion, namely the exclusion for exploring, prospecting or drilling stated in section 355.25(2);
  3. there is insufficient evidence some of the claimed activities and the expenditure on those activities took place either within a registration year or at all.

The AAT found that the claimed activities fall within the scope of the exclusion provision for exploring, prospecting or drilling stated in section 355.25(2), and that the claimed activities are not core or supporting R&D activities.

In a recent update to the ASX in response to the decision, the company has noted:

  • On 14 April 2023, the Administrative Appeals Tribunal handed down its decision in relation to the Company’s application for review of Innovation Science Australia’s (ISA’s) rejection of the Company’s 2013/14 & 2014/15 Research and Development tax incentive claims. The Tribunal’s decision was unfavourable for the Company. The Tribunal found that the Company’s activities did not qualify for Research and Development rebates.
    • The Company elected not to appeal the Tribunal’s decision.
    • The Company is repaying the grant originally received in respect of 2013/14 activities, including general interest charges to date and shortfall penalty assessment, at the rate of $20,000 per month.

This case again highlights the importance of documenting and assessing activities in accordance with programme regulator guidance so as to minimise the likelihood of ending up in a lengthy and costly dispute with the regulators. The AusIndustry guide to interpretation documents include guidance on how the regulators will apply the exclusion provisions in 355.25(2) ITAA97.

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

 

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