The Silver Mines case: What tax agents need to know

The decision in the case of Silver Mines Pty Ltd v Innovation Australia was handed down by the Administrative Appeals Tribunal (AAT) on the 13 September 2016. The case involved the request by the company to allow a late lodgement in respect of a registration for the R&D Tax Incentive.

Timing is everything

Companies should be aware that they have up to ten months after the end of the financial year to lodge their R&D Tax Incentive Application for that financial year, and R&D Tax and Incentives can assist with these claims in a timely manner. Companies with a financial year end of 30 June 2016 have until 30 April 2017 to submit their R&D tax incentive claim.

There are no surprises in this particular case. The matter turned on the fact that the company could not establish the exceptional circumstances required for the exercise of discretion by Innovation Australia, to allow a late lodgement of the R&D Registrations.

Claims made by Silver Mines Limited

In 2014 Silver Mines Limited applied to register its past R&D activities for the 2010-11 and 2011-12 income years. Silver Mines Limited claimed its registrations, which were lodged 12 and 14 months after the deadlines, should be accepted on the following exceptional circumstances:

• The company didn’t have detailed knowledge of the program.
• The business was run by the father of the family who had passed away before the registration form lodgement date.
• The son, who took over the business, was not sufficiently aware of the R&D Tax Incentive to understand the importance of registering before the deadline.
• The tax advisor/ company accountant failed to properly advise the company of the need to register for the R&D Tax Incentive or the deadline for registration.

The decision

Innovation Australia has the discretion to allow for a further period of time for late registration where the action, omission or event causing the applicant’s delay was not the responsibility or fault of the applicant and not within the control of the applicant.

An important factor in the decision of Innovation Australia not to exercise its discretion to allow late lodgement, was that the Applications for Registration were significantly out of date. During this period, there did not appear to be “timely and prudent steps” by the company to progress the lodgement of the Registration document even after it was known to be out of time. The AAT also agreed that the delay was not “outside the applicant’s control.”

Importantly for those in the accounting profession, the Tribunal did conclude that if an accountant had a responsibility to prepare and lodge a tax return, there was a corresponding positive obligation to advise the client of the R&D Tax Incentive and enquire whether it would be applicable in relation to the client’s business activities for that year.

When do you need to lodge?

Extensions to register late R&D Tax Incentive Applications are very limited. Companies and their tax agents need to be aware of the lodgement deadline for the registration of R&D activities. For companies with a 30 June 2016 financial year end, lodgement of the Application needs to be completed by 30 April 2017.

More information on R&D Tax Incentive registration is available here.