Updated ATO Alerts on R&D Tax
In December 2023, the Australian Taxation Office (ATO) unveiled two Taxpayer Alerts (TPAs) addressing research and development (R&D) practices employed by associated entities and activities conducted overseas for foreign-related entities. These TPAs target arrangements aimed at claiming R&D tax offsets that may not be legitimately available or that artificially increase the R&D tax offset amount.
It’s important for companies to carefully assess the applicability of all legislative requirements, guidance and alerts to ascertain their eligibility as rightful claimants of the R&D tax incentive (RDTI).
ATO Alerts
Taxpayer Alert TA 2023/4: Focuses on instances where entities incorrectly claim the R&D tax offsets expense incurred with associated entities. This could involve service agreements, intra-group arrangements lacking commercial substance or situations where the R&D entity doesn’t control strategic decisions regarding R&D activities or intellectual property developed.
Taxpayer Alert TA 2023/5: Focuses on concerns regarding Australian entities claiming R&D tax offset expenses on overseas R&D activities that are conducted for foreign-related entities. This includes instances where the R&D entities might not qualify for the tax offset because the expenditure doesn’t represent a genuine investment in innovative research and development. It also covers instances where the arrangement for claiming the tax offset is structured to primarily seek tax benefits rather than genuinely support R&D efforts.
These alerts underscore the importance of adhering to legislative requirements and ensuring the R&D tax offset claims are legitimate and compliant.
Businesses engaged in eligible R&D activities during the financial year ending June 30th 2023, are reminded to register their FY23 claim by 30th April, 2024.
For further updates and insights into the latest developments on R&D, be sure to also read our update on Enhanced Transparency for Research & Development Claims.
If you have any questions or require more information on how these alerts could impact your business, contact your Simmons Livingstone advisor at 1800 618 800 or via email at admin@simmonslivingstone.com.au.
