ATO puts tech companies on notice for false R&D tax incentive claims

Greg Wood/AFP/Getty Images

The Australian Taxation Office has singled out technology companies to warn against false claims of research and development tax incentives.

The agency put out two fresh “taxpayer alerts” regarding the practice, after noticing concerning “behaviours” within the software and tech industries, as well as agriculture.

“We are focussing our efforts on the small number of people who are deliberately trying to exploit the system,” said ATO deputy commissioner Michael Cranston.

He said that “there are various examples of improper activity” but the main concern is businesses claiming ordinary business activities, such as new software development, as research expenditure in order to claim tax breaks.

“The law states that research activity needs to genuinely be generating new knowledge. We will work with organisations that have made honest mistakes to help them rectify these errors, but are also concerned that a small number are deliberately doing the wrong thing.”

The R&D tax incentive is managed by both the ATO and AusIndustry, on behalf of Innovation and Science Australia. AusIndustry handles the registration of research activities while the tax office administers the expenditure claims made on company tax returns. Businesses can claim for up to $100 million of R&D expenditure per year.

The incentive is open to any industry, but today’s warning was directed specifically at tech and agriculture companies.

The crackdown comes after ATO’s court victory against tech giant Uber last Friday, which forces its drivers to pay GST. The tax office also warned last month that those generating income from the sharing economy would be targeted for undeclared income.

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