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.