The Administrative Appeals Tribunal (AAT) recently upheld a decision by the Commissioner of Taxation to reject an entity's Research and Development (R&D) Tax Concession claim because it could not substantiate the claimed expenditure.

Read the full report on Hadrian Fraval Nominees Pty Ltd and Commissioner of Taxation [2013] AATA 127 (12 March 2013)

Tribunal upholds ATO decision

The AAT found that the entity did not take reasonable care to account for the R&D expenditure it incurred in relation to materials, licence fees and consultancy services.

The Commissioner sought repayments and imposed penalties at the rate of 25% on the entity for two income years they had claimed. This amounted to over $550,000 in repayments and penalties. In addition a claim for R&D offsets valued at $170,000 was denied.

What this means for you

Companies must maintain adequate records to substantiate the R&D activities claimed and the incurring of expenditure in relation to those activities.

The tribunal found that the inherent systematic, investigative or experimental nature of R&D activities calls for a detailed degree of record keeping – generally records kept for the purpose of capturing details of those activities.

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