Welcome to 2018, and some thoughts on R&D

Hi everyone and welcome to 2018, no doubt it will continue to be more of “different” but “normal”! 2017 essentially closed quietly notwithstanding that it’s been a year of significant change for the Insolvency profession. Whilst steps were taken to align the operations of both the Bankruptcy Act and the Corporations Law, it is still amazing how different they are and how some of the really powerful sections of one Act find it impossible to be transcribed into the other. Enough of that, it is what it is, and we must all learn to work with it.

One thing that has popped its head up of recent times though is the Taxation Commissioners current focus on Research and Development (R&D) claims. Such claims can be extremely valuable to a business in fact amazingly so, if the business truly features R&D as a key part of your operations. The underlying issue however is that there are primarily two fundamental facets to making the claim. Firstly one must actually be running a proper Research and Development programme, and secondly, one must ensure that one’s documentation and claim are absolutely correct. This of course is best achieved by seeking the assistance of a specialist in the R&D area, who are commonly paid on a percentage basis of the claim itself. As an aside, we are not such specialists, but can guide you to someone if you need.

The problem with situations or revenue streams like this is that they can easily become the playground of the ‘less than professional’ professional, one who is out for the quick dollar. The scam essentially works around a theory that if the paperwork looks right, then all will be right in the end. Trust me nothing could be further from the truth.

As a result, no doubt seeing a stunning commonality in the documentation supporting widely different claims, the Commissioner has increased his level of review and has offered a period of amnesty to claimants where, upon reflection, they may now consider their original intention to lodge a claim may have been misguided. Those that do can come to a financial arrangement with the Australian Taxation Office (ATO) with regard the monies that must be reimbursed and all is well. For those that don’t, should their efforts to prove the validity of their claim fail, then they will be faced with not just the primary debt but also potentially significant penalties and interest charges. This will particularly be the case where multiple years are involved.

Regardless of whether you adopt the conciliatory approach, or alternatively a more combative style, clients may well find themselves with a debt that they can’t easily afford at this time. Panic should not be the order of the day and a more organised, premeditated and professional approach should be adopted. There are a raft of alternatives; and a conciliatory approach combined with a proper plan to deal with the sudden increase in liabilities will no doubt at the end of the day be the most economical way to proceed. It will certainly offer the greatest chance of survival. The age old adage, ‘prior preparation and planning’ will (more often than not) overcome the problem.

Regardless of what else happens this year the one thing we can all expect is increasing revenue demands on all. We may well get tax cuts but these will be supported by other revenues that grow as ‘industry funding’ or ‘user pays’ models which allow the non-use of the word tax. It is still government revenue though. Businesses will need to plan on paying more as time goes by, and be capable of adapting and/or changing quickly so as to be able to modify methods or processes as new charges come into play.

Likewise make sure that anything that you offset or claim is correct and legitimate. With the increasing data trawling capabilities of systems, and algorithms being built into programmes that can spot errors, irregularities, or inconsistencies, it will only be a matter of time before you are asked to explain; and no doubt repay. This is clearly visible from the R&D issue raised above.

Have a great 2018, and I trust it brings you all you hope for.

Enjoy the read.