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Use Our R&D Tax Incentive Record Checklist

We are happy to provide you with our R&D Tax Incentive Records Checklist.

It is the same comprehensive checklist we use when helping our clients safely maximise the amount they are claiming under the Government scheme or helping them remediate after an audit by the Government.

Recap on the R&D Tax Incentive

The Australian Government offers rebates on R&D work that meets specific criteria to encourage Australian businesses to innovate.

To be eligible to claim, you need to be a Pty Ltd company, spending more than $20,000 pa, be conducting the work in Australia, and you must show that you have created new knowledge.

New knowledge is the key here – or more accurately, how you document and explain this in your application for the rebate. But, unfortunately, this is where most businesses go wrong with their claim.

The most common mistake

Over the last ten years of working with the R&D Tax Incentive, the most common mistake we see is the documentation doesn’t meet the correct ‘scientific language and format’ that the Government require and that there is not a complete set of ‘documents’ to substantiate the ‘claim’.

Not getting this right makes your application to claim ineligible.

What does 'scientific language' mean?

The Government is looking for you to provide a hypothesis around unknown outcomes and a set of experiments that will test the hypothesis and reveal ‘new knowledge’. You will need to include:

  1. A hypothesis that clearly expresses as a scientific problem and how you ‘think’ it can be solved, including what are the unknown ‘outcomes’.
  2. The experiments you will conduct to test this hypothesis and resolve the unknown outcome
  3. Verifying that the new knowledge (or unknown outcomes that are now new knowledge) ie.. proving the hypothesis to be correct (or not).
  4. The experiments you will conduct to test this hypothesis and resolve the unknown outcomes
  5. Verifying that the new knowledge (or unknown outcomes that are now new knowledge) ie.. proving the hypothesis to be correct (or not).

A mistake can trigger an audit and a fine

If your application does not meet the criteria, it can trigger an audit of past claims. A recent review of audits conducted by the Government on this scheme by the Small Business Ombudsman found that the audits were, without exception, retrospective, meaning any previous claims submitted were included in the Government’s audit.

Why do you need to pay attention to the detail

Recently the Government revamped the requirements for the application and the way your work needs to be described. It changes means:

  1. The number of failed claims will increase, leading to increased audits
  2. It is no longer possible for your Accountant to complete the application without you providing additional detail as follows:
    • What was the hypothesis? (4,000 characters)
    • What was the experiment, and how did it test the hypothesis? (4,000 characters)
    • How did you evaluate or plan to evaluate results from your experiment? (4,000 characters)
    • Describe your conclusions (4,000 characters)
    • What new knowledge was this core activity intended to produce? (1,000 characters)
    • Explain what sources were investigated, what information was found, and why a competent professional could not have known or determined the outcome in advance (1,000 characters)

Use our checklist to ensure you do not fail your claim this year

Our checklist is comprehensive and will help you to align your work and supporting documentation, so that come claim time, you will have everything your accountant requires to complete it and ensure that nothing found within the application triggers an audit.

Download the checklist

We also provide document templates to help you easily apply the scientific language that the Government requires.

How likely is an audit?

In years past, not so much. However, the new requirements in place will easily identify ‘claims that are lacking’ and thus trigger more audits. AusIndustry is also on record as stating that they will be increasing the number of audits.

Our experience

Companies work with us to either:

  • Manage the potential risk of audit or to remediate when they have been audited – remember it’s not just the current claim but every other claim you have made that will be included, and if you do not have the correct documentation in place, you will be required to pay back the claim amount along with a 50% penalty.
  • Safely increased claim amounts – averaging a 30% increase.

We have several case studies which explain the process and outcomes

Why is this?

Because working through the processes reveals, without fail, items that you could be claiming, but because of lack of documentation, your Accountant has had to leave them out of your rebate application.

Want to understand if this is impacting you?

We have worked with dozens of companies that needed to get ready for an audit or wanted to manage the risk of a potential audit and to look at how to increase the amount they were claiming.
 
You may be interested in looking at some of our case studies to see how other businesses approach implementing the R&D Tax Incentive.
 
We offer template packages for the documentationtraining to help with systems and processes and audit and review workshops to make sure you are retrospectively and going forward maximising the amount you can claim safely, and not ‘triggering’ an audit due to lack of documentation.
 
If you would like to talk more about templates, audits or implementation of your R&D program, feel free to book a 10min meeting. We also run a regular R&D Discussion Group where you can learn more from both us and other companies leveraging the R&D Tax Incentive and are looking to make the process and implementation as slick as possible.

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