The unfashionable topic of research and development (R&D) tax concessions moves towards centre stage this month, with the government agencies responsible for its administration, AusIndustry and the Australian Taxation Office (ATO), both taking a closer look at its workings.
AusIndustry says it is interviewing or intends to interview 100 Australian businesses in preparation for a mid-year review. The review will look for answers to the question: "Is the R&D tax concession working in building Australia's overall levels of R&D?"
The ATO seems to think the answer is "No". It has expressed concern that large companies are misusing the R&D tax rules. Jim Killaly, the ATO's deputy commissioner for large business and international, told a tax summit last month that the ATO believes operating entities have claimed "some hundreds of millions of dollars" of depreciation and R&D expenses.
"[This is] in addition to many hundreds of millions of dollars of interest expense. These claims are also under examination because the operating companies never really paid for the plant and equipment [as] the loan principal was never repaid," Killaly said.
Rick Eardley, Senior Manager at BSI stated that it is essential for Companies to use specialists to maximise their potential return from their R&D Tax Concession Claim, and to ensure that any claim will pass the inevitable "Reds Visit" from Ausindustry and the ATO.