Substantiating a R&D Tax Incentive claim

To claim the R&D Tax Incentive a company must be able to meet strict eligibility criteria when substantiating their R&D activities. The government requires businesses to prepare step by step documentation that can be very time consuming throughout the year. In most cases, companies that fail to substantiate a claim is a result of from poor record keeping. AusIndustry may choose to examine in detail activities registered at a later stage as part of it’s compliance reviews and make a finding on the eligibility of some or all of the activities detailed in the application.

In the case of NaughtsnCrosses Pty Ltd v Innovation Australia [2012], Innovation Australia, in conjunction with the Commissioner of Taxation, argued that the R&D activities claimed did not satisfy the statutory eligibility criteria. Deputy President Hack stated that “the evidence of experimentation and testing is vague and imprecise” and found that the activities under review did not meet the specified guidelines of systematic, investigative and experimental.

In the case of Tier Toys Limited v FC of T 2014 ATC 10-353, the ATT upheld the decision by the commissioner that the taxpayer had not produced adequate records and documentary evidence to demonstrate that the disputed R&D related expenditure was incurred. Additionally, the AAT observed that, even if adequate documentary evidence had been produced, some of the expenses claimed (such as certain travel and marketing expenses), would not be eligible R&D expenditure.

It is clear that not only is it important to keep good records throughout the financial year in which a company is claiming for, but it is also important to seek professional advice from and R&D Tax Incentive specialist. This will minimise the overall risk of an AusIndustry audit. Additionally, as the R&D Tax incentive is self assessed program claimants are held responsible for ensuring they meet the key eligibility criteria in relation to the R&D expenditure and activities. Hence, the are liable for producing the correct documentation.

In addition to keeping records, it is also important that they are time stamped and stored in correctly for easy access in the event of an audit. R&D tax documentation is a complex process. Through TaxTrex, however, is can be systemised and simplified, saving companies time, money, and even sanity.

TaxTrex uses three simple annual surveys to keep R&D documentation current and accurate. In addition, TaxTrex partners with Australia’s largest R and D tax advisory firm, Swanson Reed. Swanson Reed guides and reviews the whole TaxTrex process. This process reduces the risk of an audit so companies do not find themselves in situations like the above cases.

Track your projects in real time

TaxTrex’s three annual surveys provide an up to date and verifiable overview of your research progress. Each survey is time-samped digitally, which will help you defend your claim in the event of an audit. Learn more

Risk assessment

Our innovative risk assessment algorithm will identify any potential issues with your R&D project. If a compliance risk is identified, our team will work with you to ensure your claim accurately meets AusIndustry’s requirements.Learn more

Real-time reports

TaxTrex surveys are digitally time-stamped to ensure the scientific process is recorded as it occurs. This unique feature acts as a proof of your research progress, and will help defend your claim in an audit.Learn more

Document storage

TaxTrex’s unique document storage facility provides a central location where all your R&D documents can be saved. If you are audited, you can simply access this facility and download all your supporting documents.Learn more