RSM Australia

R&D year end planning during an unprecedented time

Tax Insights

In what has been an unprecedented year so far around the world, business and life in Australia have never been more different. At a time when there is economic uncertainty and cashflow is critical, it is more important than ever to plan for the R&D Tax Incentive and to ensure robust documentation is in place to secure much needed R&D funds. R&D Tax Update

Further, over the past 12 months significant activity has been witnessed in the administration of the R&D Tax Incentive and in R&D tax law. Understanding these developments is important to maximising the potential from the upcoming 2020 R&D claim.

Our summary outlines the key items to look out for and documents to prepare leading up to year end. Summaries and links to more detailed articles have also been provided to recent developments in the R&D Tax space.


Recent Developments in R&D Tax

What a year it has been in the R&D Tax space! Key events have included the first case law on core eligibility definitions and a broad, sweeping review of the R&D Tax Incentive by the Australian Small Business and Family Enterprise Ombudsman (“the ASBFEO”), amongst others. Arising from these actions, the compliance landscape and the lens from which R&D Tax program should be viewed has changed dramatically. A key summary of recent developments are as follows:

  • The Landmark Moreton Resources Case and Other Cases – The landmark case of Moreton Resources Ltd v Innovation and Science Australia [2019] FCAFC 120 (“Moreton Resources”) was handed down by the Full Bench of the Federal Court in August 2019. The case brought with it legally binding principles on interpretation of some of the key concepts for eligibility under the R&D Tax Incentive program. The case overturned the previous position of Innovation and Science Australia and the Administrative Appeals Tribunal position in relation to concepts such as the meaning of the word “experiment” and what constitutes “new knowledge”. A link to the detailed RSM analysis is available by clicking here.

Since Moreton Resources, two decisions have been handed down by the Administrative Appeals Tribunal in the mining and resources sector. Both of these decisions went against the taxpayer and both considered the legal principles introduced in the Moreton case. This should serve as a reminder to claimants that whilst the Full Federal Court may have ruled against the narrow interpretation on some of the concepts for eligibility, it is still imperative to ensure that the fundamental governance and documentation processes are adhered to for the purpose of the R&D Tax program. A link to the detailed RSM analysis on the recent Administrative Appeals Tribunal cases is available by clicking here.

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