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Substantiating an experiment: The R&D tax conundrum


The research and development (R&D) tax incentive is a new entitlement-based program that is in effect for financial years commencing on or after 1 July 2011. It replaces the former R&D tax concession program. The incentive offers a 45% refundable tax offset for companies with a group turnover of less than $20m and 40% non-refundable tax offset for companies with a group turnover exceeding $20m. Companies have been able to register their R&D activities under the incentive since 1 July 2012. However, lack of clarity around changes that have been made to the R&D tax legislation, together with recent decisions by the Administrative Appeals Tribunal (AAT) about substantiation of claims, have contributed to uncertainty for taxpayers during the transition to the new regime.

This article provides an overview of the new requirements, examines the implications of the AAT decisions, discusses the difference between documentation and substantiation, and provides a case study.

Author profiles

Damian Smyth
Damian is Swanson Reed’s Chief Executive Officer. He is active in innovation tax policy issues and regularly involved in consultations during proposed changes to the R&D tax incentive and other measures impacting start-ups and companies undertaking R&D activity. Damian has a wealth of experience in the hands-on preparation and substantiation of R&D claims and managing ATO/AusIndustry compliance matters. - Current at 05 September 2017
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Gloria LIM
Gloria is an Analyst at Swanson Reed.
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Adam Rogers
Adam is a Tax Principal at Swanson Reed, Australia's largest specialist boutique R&D tax advisory firm. He has over 10 years experience managing some of Australia's largest R&D tax incentive claims. His main area of expertise focuses around assisting companies in all stages of the R&D claim defense process including AusIndustry reviews, ATO audits and AAT mediation and representation. - Current at 06 December 2012
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