IT Error Causes Underestimation Of Australian R&D Credit Claims

by Mary Swire, Tax-News.com, Hong Kong

24 April 2003

Flaws in the Australian Tax Office's (ATO) computer system have led to an underestimation of the amounts of R&D tax credits claimed, according to reports this week.

A review conducted by the Auditor General on the R&D tax concession programme has found that the information systems used by the ATO have been unable to recognise certain labels on the concession amendment forms. This has been caused in part by firms using the wrong label on the form, which has meant that the system is unable to read the appropriate information.

When an R&D credit is claimed, the form in the first instance logs their details with the DITR division of AusIndustry. This information is then stored by the ATO on a shared network. The audit has found that registrations for the credit on the ATO hard drive are 28% lower than the figures recorded by AusIndustry.

The mismatching figures are likely to skew the estimate for total expenditure on the R&D tax credits, which is based on ATO figures.

However, it is claimed that the companies affected by the errors were mainly smaller firms, and therefore accounted for less than 10% of the value of all concessions.

The Auditor also found some worrying lapses in security with regard to the data stored with the ATO, which was neither password protected nor subject to application level control. This follows findings by a 2000/2001 audit which discovered inadequate procedures relating to the sharing of information on a wide area network.

In response to these revelations, the ATO is currently reviewing its IT policies and practices.

Recommended