Australian R&D Tax Incentive scrutiny on the rise

Recently released figures confirm what many insiders have long suspected; the scrutiny surrounding Australian R&D Tax Incentive claims has increased significantly in recent times.

Of the 12,123 R&D Tax Incentive claims made in FY2016 just 0.6 per cent were the subject of some level of review, whereas 2.1 per cent of the 13,156 claims made in FY2018 were reviewed.  This represents a 250% increase within a 2 year period.

Not surprisingly, the increase in R&D compliance activity saw a significant increase in the value of R&D claims recovered by the government ($200M in FY2018 compared to $115M in the prior year).

These figures confirm what previously had to be inferred by individual accounts, most notably the highly publicised R&D rejections experienced by Airtasker, Digivizer and the Commonwealth Bank of Australia over the past 6 months.

What neither the recently released figures nor the individual accounts reveal is whether there is a consistent basis for the rejections.  Given that the R&D Tax Incentive operates through self-assessment, it is the responsibility of claimants to determine their eligibility for the incentive, and to adequately record said eligibility.  It is unclear whether the R&D rejections stem from claimants being inherently ineligible for the incentive or from inadequately recording their eligibility.

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