The ATO released its first annual R&D Tax Transparency Report. This initiative stems from the R&D reforms brought into effect from 1 July 2021, along with the increased focus on corporate tax transparency and is designed to provide a new level of transparency into the R&D Tax Incentive (RDTI) program.
The report details
The RDTI is Australia's flagship program to support businesses investing in innovation in Australia. The aim of the R&D Tax Transparency Report is to improve accountability. Transparency is crucial for maintaining public trust in our tax system and programs like the RDTI are not immune. Making some of the details around RDTI claims more accessible, encourages businesses to ensure their claims are accurate and compliant with all legislation and available guidance.
The data points in the report relate only to the 2021-22 financial year and reflect the following details for each entity that lodged a R&D claim:
- The name of the R&D entity claiming the RDTI.
- The entity's Australian business number (ABN) or Australian company number (ACN).
- Total R&D expenditure (total notional deductions claimed minus any feedstock adjustments).
Subsequent reports will be published annually, detailing the claims from the previous financial year.
Observations and insights
The recently released R&D Tax Transparency Report provides valuable insights into the landscape of R&D and innovation in Australia. As an entitlement-based program, the RDTI is open to a broad range of industries and the report revealed over 11,500 entities collectively declared an R&D expenditure of $11.2b for the 2021-22 financial year. The report highlights substantial differences in R&D spending across entities, ranging from $0 to more than $200m.
The average R&D expenditure recorded is just below $1m, while the median is slightly above $300,000. This disparity indicates that while some companies have substantial R&D expenditures, the majority spend around the median value.
The report underscores the importance of robust compliance and governance frameworks, emphasising that businesses must ensure proper documentation and processes are in place to support any RDTI claims made.
Upon considering the data, it is evident that there is a consistent demand for heightened investment in innovation and R&D within Australia. The goal is to see more businesses accessing the program, thereby balancing the average expenditure and reducing the disparity caused by larger R&D claims.
We’re here to help
If you have any questions or need further discussion on what this report might mean for you, please reach out to Grant Thornton’s Innovation Incentives team.
Learn more about how our Research and Development (R&D) Tax Incentive services can help you
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