An enquiry about an R&D tax claim can arrive long after the work was completed. The people who conducted the experiments may have moved roles, records may sit across several systems, and the original application may have been prepared by an external adviser. The immediate priority is to understand the request and organise an accurate response, rather than send a hurried explanation of the entire project.
Identify the question and the deadline
Read the correspondence carefully. Identify the entity, income year, activities and expenditure under examination. Check whether the letter requests information, raises preliminary concerns or communicates a decision. Record the response date and seek advice promptly if meeting it will be difficult. An extension should never be assumed simply because you have asked for one.
The Department of Industry, Science and Resources, including the program administered through AusIndustry, examines activity eligibility. The ATO examines the tax claim, including expenditure and entitlement. The agencies can share information. Knowing which issue is being considered helps you select the relevant records and advisers, while recognising that a response may have consequences for another part of the claim. [R1]
Preserve the original evidence
Collect the submitted registration, tax schedule, technical reports and correspondence, together with the underlying project and financial records. Preserve original files and dates. Do not rewrite historical records to make them appear contemporaneous. If a later explanation is needed, identify it as a later explanation and show the records on which it is based.
Create a response table with one row for each question. Record the evidence available, the person who can explain it and any gap requiring attention. This is a practical organising tool, not a substitute for analysing eligibility. It helps prevent a large document collection from obscuring the specific question the reviewer has actually asked.
Bring technical and financial explanations together
Arrange a discussion involving the people who conducted the work and those who prepared the expenditure calculation. Ask them to explain the connection between the registered activity, the work performed and the amounts claimed. If their descriptions differ, investigate the reason before responding. Different terminology may be harmless, but it can also reveal an activity boundary or allocation issue.
For example, an application might describe a whole product development project while project records identify a narrower experimental task. The response should address that distinction honestly. A more elaborate narrative will not resolve a mismatch unless it accurately explains the underlying facts and the legal basis on which the claim was prepared.
Decide the response strategy
A useful response is relevant, evidenced and consistent. Have the appropriate adviser consider the legal issues, the factual explanation and any implications for other years or expenditure categories. If errors are identified, obtain advice about correction and the applicable process. Do not assume that defending every element of the original claim is necessarily the best approach.
Ardian Law provides legal and technical assistance with R&D reviews and disputes, working alongside your accountant or existing adviser. Call 02 8111 7700 and have the correspondence, response deadline and relevant income year available for the initial discussion.