ATO to target misleading advice, aggressive sales tactics in R&DTI space

The ATO has highlighted some of the areas that tax professionals should focus on to ensure their clients research and development tax incentive (R&DTI) claims are "airtight and won't result in amendments and repayments down the track".

Tax professionals should ensure they advise and educate their clients on program eligibility requirements and rigorously examine accounting data to ensure only eligible R&D deductions are claimed, the ATO said.

"Let clients know that receiving a receipt for registering R&D activities with Department of Industry, Science and Research (DISR) doesn’t mean these activities are approved," it said.

Tax professionals should also check that deductions aren't being claimed for payments to associates that are incurred but not paid, it added.

"Both the ATO and DISR review and verify claim information to ensure it's correct. This includes checking information against other sources," the ATO said.

The Tax Office has previously emphasised that the Department of Industry, Science and Research (DISR) and the ATO are jointly responsible for administering the R&DTI.

While the DISR administers registration and compliance of R&D activities, the Tax Office is responsible for administering matters relating to the R&D tax incentive tax offsets, including ensuring the correct expenditure is claimed on eligible R&D activities.

The ATO's current areas of concern with R&DTI include businesses trying to claim expenditure relating to ordinary business activities that are not eligible R&D activities, issues with the apportionment of overheads and claims that incorrectly include notional deductions in relation to R&D activities delivered by associated entities, where the amount has not been incurred or paid.

The Tax Office said it was also seeing incorrect R&DTI claims where Australian companies have claimed the tax offset for expenditure incurred on R&D activities conducted overseas by foreign related entities.

"An Australian company can't claim for expenditure incurred on overseas R&D activities if they weren't conducted for them and instead conducted for the foreign related entity," it said.

ATO urges tax professionals to report dodgy advice

The Tax Office said that tax professionals play a valuable role in providing support on R&DTI and upholding the integrity of the incentive.

"As we edge closer to tax time, we're concerned about tax professionals and others providing tax advice who aren't licensed, whose practices put both their clients and the integrity of the R&DTI at risk," it said.

"Aggressive sales tactics remain on our radar, and we're asking for your help to stamp out this kind of behaviour."

Where tax professionals hear about poor or misleading R&DTI advice being promoted, the ATO said it encourages them to come forward and make an anonymous tip-off.

"Your information helps us take action and safeguard the integrity of the system for everyone. We work closely with the Tax Practitioners Board to bring serious consequences to tax agents who mislead their clients," it said.