On 21 February 2019, AusIndustry released new software guidance documents: “Software Activities and the R&D Tax Incentive” and a “Guide to Common Errors”.
The R&D Tax Incentive is a government initiative that focuses on providing a tax offset for some of the company’s costs associated with research and development activity.
While there is legislation that determines eligibility it is self assessed. What does that mean?
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Research and development ("R&D") can provide valuable information and guidance for growing a business. Defining a businesses target market, identifying the customers needs and then developing new products and services that fit these customer needs. Research and development is of particular importance to innovation within a business, and plays a critical role in the innovation process. It provides an understanding of technology investment requirements now and in the future to produce new products, processes and services.
On Monday 20th February the ATO released its Taxpayer Alert TA 2017/5 warning of review activity being undertaken by ATO and AusIndustry (who jointly administer the R&D tax incentive) targeting R&D tax incentive claims on software development projects where some or all of the expenditure incurred are not eligible R&D activities.
We have broken down the top nine risks in a clear and concise summary with some insight on measures that should be adopted to ensure that R&D claims satisfy the eligibility criteria.