ATO Warnings On Research and Development Claims

New ATO Warnings on Research and Development claims.

The ATO recently released two new taxpayer alerts to warn entities and their advisers about the ATO's concerns regarding incorrect research and development ('R&D') tax incentive arrangements.

These alerts are in relation to expenditure incurred with associated entities, and activities conducted overseas for foreign related entities.

The ATO is concerned these arrangements are being used to:

  • claim the R&D tax offset in situations where it would not otherwise be available, either at all, or at least in the income year claimed by the R&D entity; and/or
  • artificially increase the amount of the R&D tax offset claimed.

In Taxpayer Alert TA 2023/4 (Research and development activities delivered by associated entities) the ATO identifies arrangements where an entity incorrectly claims the R&D tax offset for expenditure incurred under an agreement with an associated entity who conducts those activities.

Taxpayer Alert TA 2023/5 (Research and development activities conducted overseas for foreign related entities) outlines the ATO's concerns about arrangements where Australian entities claim the R&D tax offset for expenditure incurred on R&D activities conducted overseas. Arrangements of concern include where an R&D entity has purported that R&D activities were conducted for its own benefit, but those activities were instead conducted for a foreign entity that is 'connected with', or is an 'affiliate' of the R&D entity.

The ATO encourages accountants and tax agents to read these alerts and consider if their clients need to contact the ATO or make a voluntary disclosure by amending their R&D tax incentive claim. Penalties may apply to participants of these types of arrangements.

These penalties can be significantly reduced if the amendment request is treated as a voluntary disclosure.

For more information, visit the Australian Government ATO website.

At Trinity Advisory, we specialise in tax accounting, business advisory and coaching services for small businesses located in and around Cairns (116 Mulgrave Road, Parramatta Park QLD 4870) and the Sunshine Coast (2/8 Maroochydore Road, Maroochydore QLD 4558).

Should you need any taxation or accounting advice for your business, get in touch with Trinity Advisory today. Our team of expert Business Accountants, Advisors and Coaches are here to help!

Ref: ATO website, Tax Professionals Newsroom, 14 December 2023


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