As reported recently in the Financial Review, a freedom of information search uncovered that over $500m has been reaped back from R&D Tax claims paid out by the joint scheme administrators (AusIndustry and the ATO) who have taken a very heavy handed and narrow approach to rejecting claims paid out by them up to 5 years ago.
The R&D Tax Incentive is an industry assistance program designed to incentivise and de-risk business R&D activities across all industry sectors in Australia. Many claimants chosen for audit feel they were legitimately eligible to make claims at the time of lodgement and the benefits they received many years ago were consequently reinvested back into their businesses; they also feel unjustly treated given only a small percentage of claimants were actually subjected to audit and consequent clawback.
The question that must now be asked is – how did the scheme administrators get it so wrong by paying out benefits if these claims were supposedly ineligible in the first place AND/OR how can they just change their views on eligibility and the level of substantiation required so long after processing up to 15,000 claims a year? It seems fair to glean that the design of the program and the manner in which it has been administered is largely at fault and many of the claimants affected are just the ones who have been selected and caught up in the mess.
Rather than providing an incentive to invest, innovate and create the products, processes and jobs of tomorrow many of these companies now face potential administration causing loss of jobs, investment and IP, quite the opposite effect to what the scheme was originally designed to achieve, it’s now better described as industry resistance than industry assistance, in the meantime Australia’s OECD ranking in R&D investment is at an all-time low and many R&D companies are taking their R&D activities off-shore due to the uncertainty surrounding the program and lack of positive Government policy settings.
If you have been affected by recent audit scrutiny and feel disenfranchised by the whole situation please join the queue and let the Ombudsman hear your story.