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ATO Issues Further Warnings On R And D Compliance

by Mary Swire,, Hong Kong

21 February 2017

The Australian Taxation Office (ATO) has issued a further two taxpayer alerts warning against the incorrect use of the Research and Development (R&D) Tax Incentive.

The initiative follows the release earlier this month of two taxpayer alerts concerning attempts in the building and construction industry to claim specifically excluded expenditure as R&D expenses. The two new taxpayer alerts relate to similar errors in the agricultural, software, and IT industries.

ATO Deputy Commissioner Michael Cranston said: "These taxpayer alerts are a continuation of our efforts to work with industries involved in R&D to ensure their claims are valid, and through compliance activities and legal actions, address businesses and advisors deliberately doing the wrong thing."

He added: "We are focussing our efforts on the small number of people who are deliberately trying to exploit the system. There are various examples of [the] improper activity we are seeing within these industries. For example, within the agricultural sector we are seeing some operators claiming ordinary farming activities which produce crops as R&D activities and expenditure."

Cranston also said that the ATO has seen companies involved in the IT sector attempting to claim ordinary business activities, such as the regular development of new software, as research activities.

The R&D Tax Incentive has two core components: a refundable tax offset for certain eligible entities whose aggregated turnover is less than AUD20m (USD15.3m); and a non-refundable tax offset for all other eligible entities.

"The law states that research activity needs to genuinely be generating new knowledge. We will work with organizations that have made honest mistakes to help them rectify these errors, but are also concerned that a small number are deliberately doing the wrong thing," Cranston explained.

TAGS: compliance | tax | business | tax compliance | revenue guidance | law | Australia | food | tax authority | construction | research and development

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