On 12 December, the much-anticipated Review of the Research and Development Tax Incentive was released by the Australian Small Business and Family Enterprise Ombudsman. It recommended a host of forms to the administration of the Incentive. A total of 24 key recommendations were included in the report covering the following themes:
- expedite the process of compliance examinations or audits so that where they are required they are carried out as close as possible to the first of the activities being registered;
- improve guidance material such that it is comprehensive, clearer and up-to-date – this improved material should be developed in consultation with small business;
- simplify agency record keeping requirements to take in to account commercial practicality for small business; and
- assist small business by helping to identify and retain responsible and professional R&D consultants.
The report found that there has been a shift in the interpretation of the legislation governing the R&D Tax Incentive, narrowing the focus and leading to more claims being rejected, particularly in the area of software innovation. Both the ATO and AusIndustry upon hearing these concerns have pledged to update their approach to compliance with the Incentive.
The purpose of the R&D Tax Incentive is to incentives businesses to invests in R&D. It is a critical source of funding for Australian small business and it is crucial that they are supported in their endeavours to drive innovation and growth.