Substantiating your R&D tax incentive claim: The recent AAT decision

It is well accepted that a taxpayer must establish the facts on which it relies to prove a tax claim. A number of Applicants failed in their claims for the prior R&D Tax Concession program because they couldn’t adequately provide evidence their activities. This decision clearly indicates that this approach by Innovation Australia will continue in the administration of the R&D Tax Incentive, and is supported by the AAT.

The Applicant in this case failed to provide sufficient evidence to satisfy the AAT that the R&D activities it described in the registration form actually took place, as described. There was doubt about the consistency of some of the evidence, but we are left in no doubt about the exact reason for the decision, with the Member of the AAT clearly referring to the lack of documentation for his decision.

Whilst this decision is a win for Innovation Australia it still leaves us with no guidance on how the definition of Core R&D activities should be interpreted or applied. This decision does, however, underscore again, the importance of making sure that all the necessary documents to substantiate your R&D activities are available and accessible in the event of an audit by Innovation Australia or the ATO.

There is no indication whether the decision will be appealed at this stage.

At FB Rice we can review your claim and put procedures in place to maximise and document your R&D Tax Incentive claims. To discuss this case or any other aspect of the R&D Tax Incentive, please contact Kate Mahady.