ATO alert: R&D tax claims for software development & farming activities

The ATO has alerted taxpayers against claiming the R&D tax incentive for ineligible software development activities.

According to Taxpayer Alert TA 2017/5, the ATO and AusIndustry are reviewing arrangements of companies that are claiming the R&D tax incentive on software development projects where some or all of the expenditure incurred is on activities which are not eligible R&D activities.

The ATO believes there are examples in the IT sector where companies are trying to claim ordinary business activities, such as the regular development of new software, as research activities. The taxpayer alert outlines the types of arrangements under review and the ATO’s concerns regarding R&D claims.

The ATO has also alerted taxpayers against claiming the R&D tax incentive for ineligible agricultural activities.

According to Taxpayer Alert TA 2017/4, the ATO and AusIndustry are reviewing arrangements where primary producers are claiming the R&D tax incentive in respect of agricultural activities where some or all of the expenditure incurred is on activities which are not eligible R&D activities. Examples of the targeted arrangements include: agricultural businesses carried on by an ineligible entity such as a family trust; or the operators of a farming business set up a special purpose entity, on the advice of a promoter or consultant, and make ineligible claims, including claims based on ordinary farming activities