Have you ever wondered who reviews and approves your Research and Development (R&D) refund? Surely, your activities are eligible if your refund is paid each year, right? Well, not necessarily.
Unfortunately, R&D applications are not formally assessed as eligible before any R&D benefit or refund is processed, so it’s certainly possible (and very common) for a company to register ineligible activities and still receive an R&D refund, therefore assuming its claim was ‘successful’. In fact, we often speak with prospective clients who are unaware that the R&D Tax Incentive (R&DTI) program is a self-assessment scheme and who believe that the information provided in previous applications is satisfactory if they have received their R&D refund. However, this is not always true, and it is an aspect of the R&DTI program that all current and future applicants should be aware of.
As mentioned, the R&DTI is a self-assessment scheme. This means, the two departments who administer the R&DTI (the Australian Taxation Office and AusIndustry) assume you’ve completed your R&D Application and Schedule in good faith and automatically accept the information you’ve provided as being true and correct, similar to lodging your personal tax return. Therefore, in most cases, you will receive your R&D refund before a government officer has assessed the eligibility of your claim – meaning the receipt of an R&D refund is not recognition of your claim’s quality or eligibility. You may receive a cash refund and still be ineligible.
Four-year review and ineligibility
Instead of reviewing the R&D claims upon lodgement, both departments ensure the program’s integrity with a four-year period of review. Accordingly, either department may go back and review any R&D claim that has been lodged within the last four years. These reviews are often a company’s first chance to truly ascertain their activities’ eligibility without applying for an Advance Finding but may also lead to companies having to repay their refunds if found ineligible.
If your R&D claim is found ineligible, either department may review other claims lodged within the review period and, in the worst-case scenario, deem all claims ineligible, forcing claimants to repay up to four years of R&D refunds plus penalties. Because of this, we strongly advise companies are mindful when preparing their R&D claims and seek advice when unsure.
To this end, our R&D team exists to bring peace of mind to our clients and offers a complimentary review of any previously lodged R&D Application for those who might like a second opinion.
If you’re interested in learning more about the R&D Tax Incentive or how our team can help ensure you have a compliant, well-documented R&D claim, please contact William Buck’s specialist R&D Incentives & Grants team.