Phone 0403 398 807  |  About  |  Contact   |   Blogs  |  Case Studies

SMBs Forced To Repay $200M + hefty Fines: R&D Tax Incentive under Investigation

Softlogic-Solutions-6-Step-R&D-Tax-Incentive-Framewok

On the 25th of July 2019, the High Court ruled in favour of Moreton Resources against the R&D tribunal position that their R&D was not allowable. This outcome has highlighted the need to clarify the definition of eligible R&D as designated by the R&D Tax Incentive (RDTI) legislation.

The Moreton ruling found that using existing technologies in a way that the outcome cannot be known, poses a level of risk that can now be considered experimental. Contrary to recent claim rejections, the technologies themselves do not have to be unknown or experimental.

Moreton made their case by referring to a Product Strategy document that outlined their objectives and highlighted the unknown outcome of their project, even though the technology was not completely new. The Product Strategy was written before starting the R&D Activities, therefore the Judge was able to confirm that Moreton proceeded with significant risk.

Recently, the small business Ombudsman has started an investigation based on concerns that the government clawed back $200M from SMBs by rejecting claims made in good faith; some up to 4 years prior. The Ombudsman has interviewed SMBs and R&D Tax consulting firms and is quoted as saying;

“We welcome the recent decision by the Full Bench of the Federal Court in the Moreton Resources Limited v Innovation and Science Australia, which has provided greater clarity around the interpretation of the laws.

“This case concerned the question of whether activities in relation to an underground coal gasification pilot facility were eligible for the R&D Tax Incentive. The court took a common-sense approach and found in favour of Moreton Resources.

“For Australian small businesses to continue to thrive, the government needs to support investment in science and research to drive innovation and growth.”

The Australian Small Business and Family Enterprise Ombudsman will deliver the findings of its investigation in a report to be published shortly.

In more recent action, the Industry Minister will seek improvements to the administration of the R&D tax incentive (RDTI), within AusIndustry, to give companies greater certainty about the claims they make under the scheme. In addition, the Tax Commissioner last week conceded there was a structural problem within the RDTI scheme.

When questioned, the Industry Minister replied “But it is very important for businesses to get advice and to get the right advice. I am very focused on making sure that AusIndustry is in a position to provide that advice to them and that we provide it with as much certainty as possible, understanding that the research and development is being undertaken in advance of when they first engage with AusIndustry,”

The above High Court ruling, the actions of the Ombudsman and the Industry Minister, will hopefully result in a clearer definition of what is eligible. The Moreton case is also seen as a positive outcome for the Software Development sector – more on that later.

Leave a Comment

Your email address will not be published. Required fields are marked *

0
    0
    Your Cart
    Your cart is emptyReturn to Shop
    Softlogic Solutions