ATO warning on making R&D claims
The ATO and the Department of Industry, Innovation and Science (DIIS) have jointly released two new taxpayer alerts as a warning to taxpayers who incorrectly claim or deliberately exploit the research and development (R&D) tax incentive program.
The alerts (TA 2017/2 and TA 2017/3) relate to particular issues identified in the building and construction industry where specifically excluded expenditure is being claimed as R&D expenses.
They also provide clarification for a wide range of businesses who had been incorrectly claiming ordinary business activities against the R&D tax incentive.
The ATO said that it has seen an increase in claims for ordinary business activity expenses, or for large parts of projects that do not correspond to the scale or scope of experimental activities. Ordinary business activities are not generally carried out with a purpose of generating new knowledge. The ATO also said that it often sees issues including claims that encompass whole of projects (where project, management, environmental and commercial risks are mistaken for technical risks) and where the activities use existing knowledge and expertise.