NSW R&D Tax Incentive State Reference Group (SRG)
SUMMARY OF OUTCOMES
Meeting Date:
Number of Participants:
17 March 2015
21 tax agents/consultants and 9 AusIndustry officers
Key Issues Discussed
Programme management
 State Reference Group Background and Charter
 Overview of NSW R&D Tax Incentive Programme statistics
o R&D head office in one state but R&D may be undertaken in another
o Q - Number of lodgements using a tax agent A. – approx. 75%
o Q - Split between refundable and non- refundable credits
o Q - re publishing of data collected eg exports/turnover
o Q. How to identify fraud and alert ATO – what are examples?
Summary of Feedback from National Reference Group (NRG) Meeting held in December 2014
 ATP focus on Tax Avoidance Schemes and Promoter penalties.
 Due diligence by tax agents and accountants on R&D claims prepared by tax agents.
 $100M R&D expenditure claim threshold passed in parliament, effective 1 July 2014.
 1.5% reduction of RDTI offset rates rejected by Senate but still government policy.
 Review of programme will be undertaken and will be part of Tax White Paper.
Reference Group Participant Items (raised prior to forum)
 IT Applications – is a mobile app ever likely to be considered R&D? Discussion around how
applicants often confuse new subject with new technology.
 Application Attachments – discussion around whether they are needed.
 ATOIDS – discussion around intent eg Feedstock.
 Rudi Werner brought to the attention of the group an NRG discussion item relating to the
mismatch of expenditure in R&D applications versus tax returns. The question was raised about
how to claim expenditure when a payment is made in a subsequent year, if there is no R&D
activity being undertaken in that year (and hence no registration number for the R&D Tax
Schedule) where accounting has not been used.
 Submission of application forms
o
Issue of when the consultant is the nominated contact, prepares form, sends to customer,
customer may adjust and then submits. Yet consultant considered responsible for what is in
the form. Can this be changed to prevent this via the software or read only format for
customer?
o
Discussion around the possibility of streamlining the form for large companies with many
subsidiaries.
NSW R&D Tax Incentive State Reference Group (SRG)
Reference Group Participant Items (raised during the forum)
 Tax agents advised that they are finding that when ATO officers are doing an audit they are
giving their view on the project R&D not just the expenditure.
 Chemical processes and hypotheses which are driven by economic outcomes.
Compliance - AusIndustry
Level 1
o
Can be a visit, workshop or appraisal letter. Not a risk review, purpose is to educate
company on program requirements. Consultant not required to attend visits. Consultants
advised that they prefer to.
o
Q Re selection of cases. A. Guidance based approach aimed at lower expenditure claims
and first time applicants.
Level 2 Reviews issues feedback
o
Where a consultant replies to an RFI (request for information) but does not copy in the
company contact Ausindustry will include company to ensure transparency of interactions.
o
Generic descriptions in registrations.
o
Over reliance on attachments to registrations without clearly describing activities within the
registration.
o
Directly quoting legislation without describing what the company did and how they did it.
o
Hypotheses: need to relate to specific experiments; must reflect a technical or scientific idea
and be expressed as a relationship between variables that can only be proven or disproven
through experimentation.
o
Q re time taken to respond to completed RFI – AusIndustry advised aimed for within 30
days.
Level 3 Findings feedback
o
Need evidence of intent to conduct activities – eg planning docs, R&D plans.
o
Projects – scope, objectives, fit with other business activities, previous findings, how many
activities, “Not for Finding” activities.
o
Expenditure – breakdown of overseas/Australian expenditure by activity, activity details
and timing.
o
Details of the activities – hypothesis, experiments, significant scientific link for overseas
activities.
o
Overseas activities cannot be solely conducted in Australia- meeting legislative tests, need
to provide evidence (eg expert opinion).
o
Australian based core activities with the SSL to the claimed OS activity is assessed for
eligibility whether a finding was requested or not.
o
Q - what is the average length of time for Findings to be completed? A - it varies according
to the information sought and provided however aiming to complete within 3 months.
Outcomes of Discussions
 Positive feedback on the SRG meeting, agreed that ATO input would be beneficial.
NSW R&D Tax Incentive State Reference Group (SRG)
 Mobile Apps - AI stated that mobile app development projects would be assessed similarly to
any other software development project, with the key being to demonstrate that the application
was developed in an experimental manner, ie. new knowledge developed in relation to how to
achieve the outcome, which could not be determined in advance by a competent software
engineer.
 Chemical Processes and hypotheses – AI advised that economic aims need to be underpinned by
hypotheses relating to relationships between technical variables.
 Consultants see value now in Level 1 education visits and are a positive change and will often
attend with their clients.
 AI advised work underway to review and improve forms.
 AI advised that some indicators of fraud/acute risk could be:
o
Operating at arm’s length
o
Invoice from director to director and no movement of money
o
Claim seen as avoiding tax, not using programme as intended
o
Subcontractors generally not an eligible R&D entity as, by definition, undertaking work on
behalf of another body.
Following the conclusion of the meeting, Customer Service Managers met with tax agents.
Recommended Actions
 Circulate the NSW R&D Tax Incentive Programme Statistics.
 Seek ATO comment on NRG expenditure issue and communicate to SRG attendees.
 Invite ATO to next SRG and extend meeting time to accommodate.