Conducting a project that is eligible for the R&D tax incentive puts businesses at risk. What if the project doesn’t go to plan or the product doesn’t turn out as expected? The purpose of the incentive is to encourage companies to engage in such activities to bring new products, services or processes to the market to increase competition, by offering a substantial cash refund on eligible activity.
Since this can result in significant cash refunds and it’s a self-assessed claim, both AusIndustry and the ATO conduct audits to ensure that companies claiming the incentive remain accountable for their claims. Whilst being prepared and documenting your R&D related activities along the way helps, it’s also important to be aware of your compliance requirements. Even if you have provided ample documentation to support your claim, it is advised to expect an audit once every three to five years.
Generally, a technical review or audit from AusIndustry will follow a 4-step process:
A brief desk review of the R&D registration form you have lodged
If not satisfied by step 1, a request for information asking for answers to specific questions may be sent to the registered company
If not satisfied by step 2, a meeting will be setup between the company and AusIndustry to discuss the disputed areas of the claim
If not satisfied by step 3, a full audit may be commenced on the activities of the registered company including obtaining full internal records of all activity undertaken throughout the financial year
As daunting as it may sound, more often than not, the governing bodies (AusIndustry and the ATO) simply require a little more understanding about the more technical aspects of your claim. Here at Carbon, we’re here to help you when your R&D claim is audited.