R&D Incentive crackdown on claims that are not supported by evidence 

Australian Tax Office and AusIndustry have increased their expectations of the type of documentation companies should maintain. This is evident in several recent AAT cases, which have rejected R&D claims due to a lack of documentation kept as the experiments were being conducted. 

The importance of record-keeping for a successful R&D Tax Incentive claim 

To claim the R&D Tax Incentive, you must keep documentation, as the experiments are being conducted, evidencing both the conduct of your eligible R&D activities and the extent to which expenditure has been incurred on R&D activities. Good record-keeping and appropriate business systems ensure that there is a strong link between activities and claimed expenditure, making your R&D Tax Incentive claim as smooth as possible.  

R&D record-keeping updates 

In addition, as part of the new online R&D Tax Registration form, launched in July 2021, it is a requirement for companies to disclose whether they have kept supporting documentation in respect of the registered core activities, including: 

  • Evidence of searches or enquiries you made to find current knowledge 
  • Evidence to show that you could only determine the outcome of the core activity by conducting experiments as part of a systematic progression of work 
  • Evidence of your hypothesis and design of your experiments 
  • Documented results and evaluation of your experiments. 

How should you document your R&D activities? 

Whilst there is no exact requirement for how or in what form you should keep your R&D records, you should have regard to the specific eligibility requirements and how your current documentation supports these requirements. Undertaking a review of your documents and processes regularly throughout the year will enable you to address any gaps in your record keeping. If we can offer a word of wisdom – don’t leave your record-keeping to the week before tax time! It’s an all-year-round task.  

In reviewing your current R&D record-keeping practices, assess whether they sufficiently capture: 

  • Time and effort spent on R&D activities 
  • The link between the expenditure and R&D activities 
  • Your hypothesis and the variables you are looking to test 
  • The scientific approach and systematic progression of work you are undertaking 
  • How you have identified technical knowledge gaps and state of the art investigations 
  • Why your R&D activities are not related to or considered to be ordinary business activities. 

How Clearpoint Ventures can assist you with supporting your R&D Tax Incentive claim 

With a collaborative approach to our services, Clearpoint Ventures is here to work with you and your accountant, not against. With a background in the tech and science industries, combined with in-house legal IP and clinical trial expertise, we are able to understand your business and know the intricacies of what you can claim – maximising returns and minimising risk. Book a 15-minute discovery call here.