ATO flags common errors delaying R&D registrations
Entities registering activities for the research and development tax incentive have been warned about some issues delaying applications.
The ATO has warned entities about some common errors causing delays with applications to register research and development (R&D) activities as it prepares to publish its first transparency report on the research and development tax incentive (R&D TI) program.
The Department of Industry, Science and Resources (DIRS), which jointly administers the R&D TI program, has identified some of the common errors made by entities and their representatives during the registration of R&D activities.
"These errors delay the progression of applications," the ATO said in a recent update.
To avoid application delays, the ATO said entities must ensure they're applying for the correct income year.
"The income year needs to match the income period on the company’s income tax return submitted to us. This can't be amended by a variation," the Tax Office said.
Entities and their representatives should also check that the correct entity is applying to register the R&D activities.
"Only the head company of a consolidated or multiple entry consolidated group can apply to register R&D activities," the ATO said.
"The head company must register R&D activities performed by any member of the group. This information can't be later amended by a variation."
The ATO also stressed the importance of providing correct details for the company representative, not their tax agent or adviser.
"The primary contact must be a company representative with their correct email address – not the email for a tax agent, adviser or consultant," it said.
"Contact details for agents, advisers and consultants are required elsewhere in the application form. Any amendments made after submission will require you to complete a variation, resulting in a delay in registration."
To avoid delays in processing the company's tax return and R&D schedule with the ATO, the Tax Office reminded entities to check that the AusIndustry – IISA number is correct on the R&D TI schedule and corresponds to the income year of the return.
The ATO also noted that the preliminary calculation on the R&D TI schedule must match item 7 label D on the company tax return.
Entities should also check that the reporting entity turnover has been correctly calculated and placed under the correct label on the R&D TI schedule.
The ATO noted that the annual turnovers of connected and affiliated entities must be included in the calculation of the aggregate turnover of the reporting entity.
The Tax Office is also set to soon publish its first tax transparency report on R&D TI claims in September this year.
The report will contain information about an entity's total expenditure on R&D, provide transparency on the benefits derived by companies from the R&D TI, and encourage voluntary compliance with the R&D program.
"We're required to publish the R&D information 2 years after the end of the financial year. The first publication will be as soon as practicable after 1 July 2024 for the income year ending 30 June 2022," the ATO said.
"We'll publish the 2022 report in late September 2024 and then annually.
"The first report will apply to companies that lodged a 2022 company tax return with an R&D TI offset claim and their income year began on or after 1 July 2021."
