The AAT has affirmed the objection decision of the Commissioner that a company engaged in activities involving, broadly, solar tubing technology was not entitled to the R & D tax offset under s 73I of the ITAA 1936 in the 2004 income year (where it had originally claimed an offset of $225,000) and in the 2005 income year was only entitled to an offset of $53,000 (when it had originally claimed an amount of id=”mce_marker”74,000).
In so doing, the AAT agreed with the Commissioner that the relevant expenditure incurred by the company (being some $600,000 in the 2004 year and some $470,000 in the 2004 year) did not meet the requirements for deductibility under s 8-1 of the ITAA 1997 (except for consultancy expenses in the amount of $53,000 in the 2005 year). This was essentially because the AAT found that the taxpayer had not incurred the relevant expenditure under the “convertible note” arrangements under which the expenditure was financed and/or because of a failure to properly substantiate the claimed expenditure.
At the same time, the AAT affirmed the 25% shortfall penalties imposed for both years on the basis that the company did not take reasonable care in the circumstances, and was not able to substantiate the relevant expenditure.
(AAT Case [2013] AATA 127, Re Hadrian Fraval Nominees Pty Ltd and FCT, AAT, Ref Nos 2010/2281 & 2010/2437, Fice SM,12 March 2013.)
[LTN 50, 14/3/13]