National Audit Office turns microscope on R&D Tax Incentive scheme

The Australian National Audit Office is examining the administration of the Research & Development Tax Incentive (RDTI) scheme, including assessing how effectively it is being run, and how ready it is for upcoming changes.

The audit will turn the microscope on the Department Industry, Science Energy and Resources, the Australian Taxation Office and of Innovation and Science Australia, in their running of the RDTI program.

Specifically, it will examine: the effectiveness of assessment, compliance and assurance arrangements under the scheme; the effectiveness of measurement and monitoring arrangements; and the effectiveness of planning for changes.

The office is currently collecting evidence for the audit, and seeking input from the public. The case is open for submissions, and is expected to remain open until May 31.

A report will be tabled in October, however, this will be months after changes come into effect at the start of the 2022 financial year.

On its website, the ANAO stressed it does not have a role in assessing the merits of the policy itself. Rather, it is focused on assessing the efficiency and effectiveness of its implementation, and whether it is achieving the desired effects.

Still, over the past few years, this has been the source of much discussion and much controversy in the startup community.

Back in October 2020, a suite of wildly unpopular changes to the scheme were rolled back in the federal budget.

However, confusion still remains around how the scheme applies to software-focused startups. In the past, startups such as Airtasker were ordered to repay millions of dollars of the funding, after an audit found it had been wrongly claimed.

The lack of clarity over what software research is eligible, and what is not, has led to calls for a whole separate software-focused RDTI scheme.

Just last week, a group of tech leaders signed an open letter to the ATO, proposing a collaborative workshop to hash out a solution and get all parties on the same page.

The “lack of mutual understanding” over how the scheme is implemented in this area means high-potential businesses could be dissuaded from seeking the rebate, the letter suggested.

That’s particularly damaging for early-stage businesses and startups, “for whom the fiscal risk of retrospective tax rulings is too great to bear”, it added.

You can make a contribution to the ANAO regarding the audit here.