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20 Aug 07 Report on R&D syndicates

In a press release issued on 16 August 2007, the Minister for Revenue and Assistant Treasurer, Peter Dutton, announced the release of the Inspector-General of Taxation’s (IGOT's) report "Review of ATO’s management of complex issues - Case study on research and development syndicates".

Mr Dutton said the Inspector-General’s report into R&D syndicates is one of 3 case studies into the ATO’s ability to identify and deal with major, complex issues within reasonable timeframes. This case study examined issues arising from tax deductions claimed from R&D syndicates between 1989-90 and 1996-97.

The IGOT concluded:

1. Aspects of the concession’s design and its administration created a high risk of inflated core technology values.
2. The ATO had good reason to be concerned.
3. The ATO took far too long to give practical guidance and this caused significant unnecessary compliance costs and extended the resolution’s timeframes.
4. Investors could have done more to be able to demonstrate compliance, but this was unrealistic in the circumstances especially in the absence of practical guidance from the ATO.
5. The ATO took far too long to finalise its compliance action; it displayed no material sense of urgency for a major period of the timeframe.
6. Only when very senior ATO executives directly managed the issue did the ATO take positive action to speed up its resolution.
7. An unchecked cultural influence of "hitting tax abuse hard" has been a major contributing factor to why the R&D syndication issue has taken well over a decade to near resolution.
8. The ATO used litigation purely to strengthen its settlement position rather than to test the issues objectively.
9. The ATO failed to communicate effectively.
10. In some specific cases the ATO acted unfairly.

“In response to the Report, the ATO has agreed to reconsider some research and development syndicate cases. Significant changes to tax administration in recent years, such as those arising from the response to the Government’s review of Australia’s self-assessment system, have addressed some of the concerns raised in the Report,” Mr Dutton said.

For a copy of the Minister's press release, go here

For a copy of the IGOT's report, go here

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