If it ain’t broke, don’t fix it. Right? Except when it comes to R&D tax incentive advice. Getting a fresh perspective on your current R&D advice can unlock valuable working capital that you can reinvest in your business.
Here are 3 reasons why getting a second opinion on your R&D advice just makes financial sense.
1. Unlock missed claims by identifying eligible activities
Good R&D advice goes beyond major initiatives or landmark projects to uncover all the ways a company is innovating. After all, genuine attempts at innovation often hide in unsuccessful experiments, failed prototypes, and behind-the-scenes process improvement initiatives. While teams close to these projects might see them as routine activities or business as usual, an R&D advisor has the skills to identify RDTI eligible activities.
Instead of just asking how a company is innovating, R&D advisors like to get granular with questions like:
• what scientific or technical problem are you trying to solve?
• what assumptions are you working with?
• what approaches have you taken?
• what did you learn that wasn't known when the project began?
Such questions frequently uncover eligible activities that would otherwise never appear in an R&D claim.
In other words, RDTI eligibility criteria are broader than many companies realise, and a second opinion can help bring this to light.
2. Mitigate risks of audits and clawbacks
To say regulatory scrutiny has increased is an understatement. Aptum Legal cites some great research that explains how the ATO uses advanced data analytics to identify statistical outliers across multiple dimensions such as industry averages, year-on-year variations, and more.
Between them, the ATO and AusIndustry aren’t just looking at whether you claimed ineligible expenses. They’re running your data against industry benchmarks, examining expenditure patterns, and flagging statistical anomalies that suggest either poor compliance or aggressive claiming.
For most startups, having to repay refunds if claims are later deemed ineligible, would be akin to a death sentence.
And it may not even be due to any fault of yours: if your R&D advisor takes your narrative on face value and doesn’t challenge your engineers, you may end up overclaiming. Or your claims may blur the line between claimed R&D activities and business operations. Both can land you in hot water.
Key takeaway: Especially for claims prepared in-house, a second opinion can ensure that your application is audit-proof.
3. Ensure tax alignment to avoid double-dipping penalties
Because the benefit of the R&D scheme is in the form of a tax incentive, your claim can end up impacting other areas of income tax including franking accounts, transfer pricing, eligibility for the Early Stage Innovation Company (ESIC) tax incentive, commercial debt forgiveness, and the small business instant asset write-off—making it crucial to align your R&D and general tax advice.
When your R&D advice has holistic oversight of your overall tax footprint, it prevents you from inadvertently 'double-dipping' (claiming costs twice) and getting in the bad books of the ATO. That alone can save you a fortune!
If you have questions about safe harbour provisions or working with a cashflow advisor or CFO, reach out to us here.
This article is intended to provide general information only and is not to be regarded as legal or financial advice. The content is based on current facts, circumstances and assumptions, and its accuracy may be affected by changes in laws, regulations or market conditions. Accordingly, neither Azure Group Pty Ltd, nor any member or employee of Azure Group or associated entities, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused. Readers are advised to consult with qualified professionals for advice specific to their situation before taking any action.
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