Ai Group slams ATO’s new R&D incentive reporting rules
The group has claimed the data, made public for the first time this week, may arm bad actors with tools to game the system.
The Australian Industry Group has slammed new reporting requirements for the R&D tax incentive, warning the ATO’s transparency push could worsen falling investment levels and even “inadvertently benefit” non-compliant businesses.
Ai Group chief executive Innes Willox said taking direct action against bad actors would be more effective than publishing an annual transparency report.
"While we fully support transparency in the allocation and utilisation of government funding, the effectiveness of the new reporting requirements in enhancing program compliance remains questionable,” Willox said.
“If the ATO is aware of the entities engaging in non-compliant activities, it should take direct action against these bad actors rather than sharing the details of participants in the program.”
Businesses can currently receive up to 43.5 per cent cashback on R&D spending, with the size of the available rebate depending on aggregated turnover.
The Tax Office’s first-ever transparency report, published this week, includes details of 11,545 claimants in the 2021–22 income year sourced from their company tax returns and R&D schedule labels.
The ATO said larger businesses, high-expenditure claims and possible fraudulent claims were its biggest compliance concerns and the measure would help encourage voluntary compliance and increase public awareness.
AI Group said it had “significant concerns” that the reporting requirements were exacerbating falling R&D investment levels rather than encouraging compliance.
Research from the employer group last year found expenditure as a percentage of GDP had been declining since the mining boom.
It currently sits at 0.89 per cent of GDP – a two-decade low – with only 54 per cent of the $20.6 billion in R&D conducted being claimed under the tax incentive.
Willox said it was indicative of “design inefficiencies that are preventing our R&D-active businesses from properly accessing the R&D tax incentive”.
“Ironically, the new reporting requirements may inadvertently benefit the bad actors the ATO aims to eliminate,” he said.
“By providing a detailed ‘shopping list’, the ATO has potentially armed these entities with the information needed to navigate and exploit the system further.”
Willox said Ai Group would be pushing for reforms during talks with the government as part of a landmark examination of the country’s R&D system.
“We are committed to working closely with our members and, as the strategic examination of Australia's R&D system progresses, we will actively engage with stakeholders to advocate for a more effective and less burdensome compliance framework,” he said.
According to the ATO’s report, public and multinational businesses claimed $4.9 billion in R&D expenditure, followed by privately owned and wealthy groups with $4.1 billion, and small businesses with $2.2 billion.
Professional, scientific and technical services dominated claims, comprising 43 per cent of total claimants, while manufacturing made up one-fifth (21 per cent).
Wholesale trade (5 per cent), information media and telecommunications (5 per cent) and financial and insurance services (4 per cent) businesses rounded out the top five.
Software company Atlassian claimed over $200 million in R&D expenditure, topping the list of companies.
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