Small Business Ombudsman completes review of R&D Tax Incentive administration processes

December 12th, 2019 review of R&D Tax Incentive

In recent months it was reported that the Australian Small Business and Family Enterprise Ombudsman had been conducting a review of the administration of the R&D Tax Incentive’s administration.

The report has now been completed and is available here.

Some key recommendations by the Ombudsman’s report include the following:

  •  “Where compliance examinations/audits are necessary, they should take place as close as possible to the first year of registration of a project. Statutory examinations by AusIndustry should not be retrospective beyond one year unless fraud or intentional disregard of the law is reasonably suspected;
  • AusIndustry should concentrate significant resources to assist a company to comply in the first year of registration of a project, alllowing them to adjust subsequent registrations as necessary. Statutory examinations by AusIndustry should not be retrospective beyond one year unless fraud or intentional disregard of the law is reasonably suspected;
  • Both the ATO’s and AusIndustry’s requirements for supporting evidence should be proportionate to the size and complexity of the business and the amount of the claim;
  • Guidance material should be updated to reflect current case law including the Moreton Resources Limited v Innovation and Science Australia [2019] FC AFC 120 decision and provide certainty about what the decision means for each industry sector;
  • Small business taxpayers who rely on specialist advice and use all reasonable endeavours to comply with that advice should not be subject to general interest charges and/or penalties;
  • Like the company tax return that includes a declaration by the tax agent, the R&DTI schedule should include a declaration by the R&DTI adviser;
  • The ATO should swiftly and effectively co-ordinate with the TPB regarding consultants under investigation so that companies are alerted of disqualified R&D “Consultants” on the TPB’s online register;
  • Registered tax agents who prepare or lodge R&DTI claims should meet specialised further education criteria that demonstrates understanding of the requirements of the R&DTI;
  • The ATO/AusIndustry/TPB should provide further guidance to help companies understand what to look for in selecting an R&D Consultant”

The commentary around the report from the Ombudsman also stated that:

  • “Both the ATO and AusIndustry have heard these concerns and have pledged to update their approach to R&DTI compliance checks to ensure better communication guidance and education;
  • The purpose of the R&DTI is to incentivise businesses to invest in research and development. For Australian small businesses to continue to thrive, it’s critical they are supported in their R&D endeavours to drive innovation and growth”

Swanson Reed appreciates the work of the Ombudsman in seeking to make the R&D Tax Incentive more secure for small business, and we agree with some of the recommendations.

Swanson Reed also however supports the efforts of the ATO and AusIndustry to uphold the integrity of the R&D Tax Incentive, and encourages all participants of the programme to review the R&D Tax Incentive guidance material published by these agencies.

Source: Australian Ombudsman

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