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Substantiating an experiment: The R&D tax conundrum

Published on 01 Mar 13 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

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 a Tax Principal at Swanson Reed. Current at 05 February 2013 Click here to expand/collapse more articles by Damian SMYTH.
 
Gloria LIM
Gloria is an Analyst at Swanson Reed.
Click here to expand/collapse more articles by Gloria LIM.

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 Click here to expand/collapse more articles by Adam ROGERS.
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