Tax consultants put on notice as ATO escalates R&D warning

The Australian Taxation Office has strengthened its approach to Research & Development (R&D) tax incentive compliance, warning taxpayers and their advisors that penalties could await those making false claims.

In a statement, the ATO on Thursday reminded business entities and consultants of their obligations under the scheme, and the need to only claim deductions for valid R&D activities.

The ATO’s new warning pertains to R&D activities for associated business entities, and actions conducted overseas for foreign related entities.

In particular, the ATO is concerned some entities are using those relationships to claim an offset where it would not otherwise be available, or to artificially increase the tax offset they can claim.

“Penalties may apply to participants of these types of arrangements,” the tax office said.

“These penalties can be significantly reduced if the amendment request is treated as a voluntary disclosure.

“Generally, the reduction is greater if the disclosure is made before being notified of an examination of your client’s tax affairs.”

While saying entities that confess their errors could face lower penalties, the ATO’s language is still sterner than its prior R&D tax warning.

In October, the ATO urged accountants and advisors to double-check their clients’ R&D incentive claims to make sure they were up to scratch.

Taxpayers and consultants can view the ATO’s detailed concerns about claims related to associated entities and activities conducted for foreign entities on the ATO website.