The ATO has recently released two new taxpayer alerts (TPAs) relating to activities delivered by associated entities (TA 2023/4) and activities conducted overseas for foreign related entities (TA 2023/5).

The release of new guidance is in line with the continued focus on the integrity of the R&D Tax Incentive (RDTI) program. They are done as new or emerging higher risk tax arrangements or issues come to light.

The ATO is concerned that arrangements, including those listed below are either being used to claim a R&D tax offset when it would not otherwise be available, or being used to artificially increase the R&D tax offset amount:

  • Stating that activities were undertaken for the R&D entity’s benefit when they were actually activities conducted for (or to a significant extent, for) a connected/affiliated foreign entity, an Australian service provider or associate.
  • Claiming overseas activities without an overseas finding covering the activities
  • Claiming expenditure incurred to an associate that has not actually been incurred, paid (or both).

These areas are now identified as those to be under a greater level of scrutiny. Additionally, examples of scenarios where these TPAs are relevant and where R&D applicants should be pay close attention include:

  • The R&D entity is collaborating with or being contracted by a foreign connected or affiliated entity.
  • The R&D is being funded by a related entity.
  • An associated entity or individual is being used as a R&D service provider.
  • Employees or contractors spend time overseas when undertaking the R&D activities.
  • Equipment is manufactured overseas and shipped to Australia for use in the R&D activities.

Companies must ensure they have a robust R&D claim process in place, along with a governance framework as audit readiness is more important than ever. The RDTI is a self-assessment based program, and reviews can occur for claimants from either of the regulators of the program.

Get in touch with Grant Thornton’s team of R&D Tax specialists to understand these new TPAs and how they may apply to your claim.

Learn more about how our Research and Development (R&D) Tax Incentive services can help you
Learn more about how our Research and Development (R&D) Tax Incentive services can help you
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