Taxpayer Alerts – Incorrectly Claiming the R&D Tax Incentive

BSI Admin

The Department of Industry, Innovation and Science and the Australian Taxation Office released two taxpayer alerts last week to warn companies that may be incorrectly categorising ordinary business activities and specifically excluded construction activities as research and development activities.

The Alerts indicate that the ATO have been increasingly investigating companies that, either intentionally or unintentionally, are incorrectly applying the legislation and receiving R&D Tax Offsets that they are not entitled to. The ATO has also identified a number of advisors/consultants who they say are engaging in ‘high risk practices’.

As AusIndustry and the ATO are now firmly in the ‘compliance’ phase of the R&D Tax Incentive Programme, it is increasingly necessary for companies to review their record-keeping requirements on a regular basis to ensure that they are able to substantiate all statements made in an R&D Tax Incentive claim and support the expenditure that has been allocated to eligible R&D activities.

TA 2017/3 reminds us that ‘Companies are expected to distinguish eligible R&D activities from ineligible ordinary business activities at the time of registration and throughout the conduct of the activities. Proper, detailed and contemporaneous records must be kept to support the registration application and the claim for the R&D Tax Incentive.’

Companies who are found by the ATO to have incorrectly claimed R&D activities will have to pay back any refund that they were not entitled to and may be subject to additional penalties. Penalties may be reduced by making a voluntary disclosure.

If you are uncertain whether you are entitled to an offset under the R&D Tax Incentive programme, or need a reminder of your record-keeping requirements, please get in touch with one of our expert consultants to organise an R&D Health Check. You can reach us on (02) 9126 9100 or via

The Taxpayer Alerts are available in full here:

TA 2017/2 Claiming the Research and Development Tax Incentive for construction activities

TA 2017/3 Claiming the Research and Development Tax Incentive for ordinary business activities