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The delivery of the research and development tax incentive is set to undergo scrutiny by the Board of Taxation as the government looks to tackle compliance duplication between the ATO and AusIndustry.
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Board of Tax probes ATO, AusIndustry administration of R&D tax incentive
13 May 2021
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As part of the federal budget, the government has tasked the Board of Taxation with examining the dual-agency administration model for the R&D tax incentive (R&DTI), with a view to “reduce duplication between the two administrators, simplify administrative processes, or otherwise reduce the compliance costs for applicants”.
The R&DTI is jointly administered by the ATO and AusIndustry on behalf of Industry, Innovation and Science Australia.
AusIndustry determines the eligibility of R&D activities while the Tax Office determines whether the R&D expenditure being claimed in the entity’s annual income tax return is directly related to the eligible R&D activities and is substantiated by documentary evidence.
The dual-agency model has attracted criticism over the years, with the Australian Small Business and Family Enterprise Ombudsman finding a duplication of compliance action by both the ATO and AusIndustry years after the R&D activity was undertaken and after R&DTI refunds were received.
The Board of Taxation’s new review will take a closer look at taxpayers’ experience during the registration and claiming process, examine R&D administration models in other countries, and evaluate any changes made by both agencies in the wake of the previous reviews of the program.
Evaluation of the R&DTI’s broader policy settings, such as eligibility requirements or rates of support, will fall outside of the scope of the review.
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“The Board may make recommendations to modify the R&DTI’s administrative model or to streamline existing administrative functions or processes,” the Board of Taxation said.
“If the Board finds that taxpayers experience difficulty in understanding the different roles and responsibilities of the two administrators, the Board should consider whether education programs or communications would assist.”
The final report will be due by 30 November.
The review comes after reforms to the R&D tax incentive passed Parliament last year, following the government’s commitment to invest $2 billion in the incentive.
Refreshed guidance around the tax incentive, peddled as straightforward and accessible advice for companies, was also released by the government late last year.
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