ATO publishes R&D transparency report

The ATO has published its second R&D tax incentive transparency report containing data for over 12,900 R&D companies that claimed the tax incentive for R&D expenditure in the 2022–23 year.

From the 12,900 companies included within the report, 46 per cent were small businesses, followed by privately owned and wealthy groups making up 35 per cent of the entities reporting R&D expenditure.

According to the report, in 2022–23, public and multinational companies invested $8.7 billion in R&D, the most out of all business populations.

From these companies, a majority were in the professional, scientific and technical services industry, followed by the manufacturing sector.

Louise Clarke, ATO deputy commissioner, said the R&DTI Program was a self-assessed and self-registered program.

“The R&D tax incentive aims to incentivise businesses of all sizes to engage in qualifying R&D activities. The R&DTI program is a significant lever for the Australian Government for funding innovation and research. It encourages wide industry participation by offsetting some of the costs and alleviating risk when undertaking R&D activities,” she said.

“It is promising to see strong engagement from businesses across so many different industries taking up the opportunity to invest in R&D activities.”

The Tax Office noted the report had been made public as responsible for reviewing the eligibility of the amounts claimed as spent on R&D and worked jointly with the Department of Industry, Science and Resources, which managed the registration process for the program and whether activities were truly qualifying R&D.

Clarke said by providing transparency of the R&D expenditure, the report aimed to improve accountability, encourage voluntary compliance and increase public awareness of the companies that have claimed the R&D tax incentive.

Additionally, the report was likely to inform public debate about the R&D Program in the context of the government’s review of the development system which was announced in this year’s budget.

Clarke noted the ATO used a risk-based approach to identify non-compliance within the R&DTI program and undertakes reviews and audits to verify R&D claims.

“The ATO has a sustained focus on administering the law with integrity and those who misuse the R&D program will come into focus through our risk-based compliance approaches,” she said.

“In line with our general compliance approach for the tax and superannuation systems, we focus on making it easy for people to comply and hard for them not to.”