The AAT has upheld the Commissioner’s disallowance of a taxpayer’s claim for the R&D tax offset.
The taxpayer carries on a business designing and manufacturing what it calls “environmental technology”. As part of its business, the taxpayer claimed it undertook R&D activities in relation to a project, which sought to develop 3 beverage purifier devices.
In 2002, the company registered its R&D activities with the Industry Research and Development Board (“AusIndustry”) under s 39J of the Industry Research and Development Act 1986. In its 2001-02 tax return, the taxpayer included an election to claim an R&D tax offset of $388,601 pursuant to s 73I of the ITAA 1936. Following a tax audit, the Commissioner issued a notice under s 73IA of the ITAA 1936 assessing the taxpayer’s entitlement to the R&D tax offset for the 2001-02 tax year as “nil”. The taxpayer’s objection was disallowed and it sought review before the Tribunal.
The Tribunal concluded that the records provided by the taxpayer were insufficient to substantiate the activities and the expenditure relating to or supporting the R&D tax offset claim. The Tribunal said the records did not establish the nexus between the expenditure and the activities to show the expenditure was incurred directly in respect of the R&D activities carried out during the 2001-02 tax year. The AAT said the taxpayer was therefore not entitled to the R&D tax offset for the 2001-02 tax offset year.
(AAT Case [2013] AATA 420, Re Ozone Manufacturing Pty Ltd and FCT, AAT, Dunne SM, AAT Ref: 2008/2184, 21 June 2013.)
[LTN 120, 25/6/13]