Public reporting of R&D claim information

Pursuant to recent legislative amendments to improve the transparency of the R&D Tax Incentive (RDTI), the Commissioner of Taxation (Commissioner) must publish information regarding RDTI claims for all income years commencing on or after 1 July 2021 (FY22). 

The first reporting (which will be in respect of FY22), is expected to take place around September 2024.

Insights based on recent discussions between the Australian Taxation Office’s (ATO) leadership team and RSM’s leadership team (as Key Agents to the R&D Tax Program) are provided below.

Background

The Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 (Bill) introduced, inter alia, transparency rules requiring the publication of information about RDTI claimants and their R&D expenditure (RDTI Transparency Rules). These rules are contained in section 3H of the Taxation Administration Act 1953 (TAA).

Whilst the mandatory publication of tax information is not novel for many Australian taxpayers (i.e., the Commissioner has been obligated to publish limited tax return information of ‘corporate tax entities’ with total income equal to or exceeding $100 million on an annual basis for over a decade [1]), the RDTI Transparency Rules are unusual in that they will materially impact Australia’s Small and Medium Enterprise (SME) taxpayer segment [2], which have to date been outside the scope of mandatory and voluntary tax transparency measures (e.g., the Board of Taxation’s voluntary Tax Transparency Code). Indeed, the ATO estimate that of the approximately 12,500 RDTI claimants annually, 80% belong to the SME taxpayer segment.

Our engagement with the ATO and previous engagement with Treasury prior to the Bill’s enactment support that the intent behind the RDTI Transparency Rules is not to expose R&D claimants or target particular R&D claimants for audit or other compliance action, but rather to ensure that there is public transparency around the investment of public funds in eligible R&D activities.

RDTI Transparency Rules

The RDTI Transparency Rules cover both non-refundable and refundable RDTI claimants and obligate the Commissioner to publish the following information, from FY22 onwards, as soon as practicable after the second 30 June after the financial year corresponding to the relevant income year:

• The RDTI claimant’s name;
• RDTI claimant’s and unique identifier (ABN or ACN); and
• The excess of the RDTI claimant’s total notional deductions (Label Z of Part A of the RDTI schedule) over any feedstock adjustments (Label B of Part B of the RDTI schedule) for the income year.

The information to be published by the Commissioner must be based on the income tax return lodged by the RDTI claimant, whether original or referable to a taxpayer-initiated amendment. For the avoidance of doubt, information referable to a Commissioner-initiated income tax return amendment cannot be published.

Implications for RDTI Claimants

The ATO’s leadership team have advised that clients should effect required amendments to RDTI information by March 2024 to ensure amendments are processed before they extract data for publication.

Whilst the ATO have committed to publishing a contextual document to outline and explain the nature of the RDTI, including the benefits it confers to the Australian economy, some RDTI claimants may wish to proactively publish information regarding their RDTI claim to ensure that corresponding information is not misinterpreted.

FOR MORE INFORMATION

RSM Australia’s R&D Tax and Government’s Incentives team remains actively engaged with the ATO regarding the RDTI Transparency Rules and all other matters relating to the RDTI. Please do not hesitate to contact your local representative for further information.

 [1] Tax Laws Amendment (2013 Measures No. 2) Bill 2013.

[2] The ATO defines the SME taxpayer segment as comprising those taxpayers with an ‘aggregated turnover’ for an income year of less than $50 million.