Cases
Recent cases
T.D.S BIZ PTY LTD and Commissioner of Taxation (Taxation) [2022] AATA 3543
This case outlines the complexities arising from purchasing components from an overseas jurisdiction for R&D purposes. The key item discussed is whether the equipment purchase was merely an act of acquisition, or if it constituted the undertaking of an R&D activity overseas. The case emphasised the need for an approved Overseas Finding to claim any work done overseas, and the importance of clearly distinguishing mere purchasing/acquisition of components or materials from overseas as opposed to the procurement of services undertaken overseas.
XQDX and Commissioner of Taxation (Taxation) [2021] AATA 4070
This case outlines the potential risks involved where R&D Tax Incentive claimants operate through a trust structure, as a trust is not an eligible R&D entity. The Administrative Appeals Tribunal determined that the claimed R&D expenditure was incurred by an associated trust, not the applicant company, highlighting the risks of using trust structures for R&D claims, as the company failed to establish that they bore the financial risk associated with the R&D, rather than the trust. This underscores the importance of proper entity structure and expenditure attribution when claiming the R&D Tax Incentive.
Active Sports Management Pty Ltd and Industry Innovation and Science Australia (2023)
This case outlined the importance of assessing R&D activities in accordance with eligibility criteria before submitting an R&D Tax Incentive claim, as R&D activities cannot simply confirm what is already known or have an outcome that can be known or determined in advance. The Administrative Appeals Tribunal determined that the activities did not qualify as core R&D activities as they did not demonstrate genuine scientific uncertainty, systematic experimentation or the generation of new knowledge and were merely akin to a ‘trial and error’ process of which was not sufficient to qualify as eligible experimentation. This case serves as a critical reminder of the stringent requirements of the R&D Tax Incentive.
GQHC and Commissioner of Taxation (February 16, 2024)
This case showcased the Commissioner’s authority to assess R&D eligibility independently of AusIndustry, who usually have jurisdiction over activity assessment. Additionally, this case clarified the interpretation of feedstock adjustment provisions, in that the statue does not restrict the transformation to only non-biological processes and/or outputs, this generating significant implications for the interpretation of feedstock provisions in R&D Tax Incentive claims.
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