The Australian Small Business and Family Enterprise Ombudsman’s review of the R&D Tax Incentive has put forward 24 recommendations, with nine of them targeted towards research and development (R&D) advisers.
It has called for the ATO to collaborate with the TPB to investigate R&D consultants, who as registered tax agents have breached the Code of Conduct or Tax Agent Services Regulations 2009, and notify companies of such disqualified R&D consultants.
It believes that small business taxpayers who rely on specialist R&D advisers should not be subject to general interest charges and/or penalties.
“It is objectively unfair that the government imposes a tax system on small businesses that is so complex that registered agents are required to provide advice (for a fee) but still leave small business vulnerable to penalty for a failure by those agents to exercise reasonable care,” said the review.
“Small business owners are susceptible to poor advice when it is delivered with confidence and promises technical expertise beyond the existing capabilities of the company.
“While some companies may, in hindsight, have acted in a complicitous way or in a way that suggests they disregarded the law, we found some companies were targeted via their reputable accountant and regular tax agent and believed they were entitled to the R&DTI offset.
“We understand the ATO maps the activities of these consultants, including the high-risk R&D registered tax agents, but only now in late 2019 is the TPB receiving advice from the ATO.”
The review notes that of the 80,000 registered tax agents with the TPB, 200 agents are registered with a “research and development” condition.
It has also called for consultants and tax agents who prepare or lodge R&D Tax Incentive claims to meet specialised further education criteria that demonstrate understanding of the requirements of the incentive.
“Given the complexity of the legislation, the R&D consultant should be an expert in the legislative aspects of the program; however, there is no guarantee that a tax agent with the R&D condition understands the rules of the R&DTI and has experience in assessing the validity of a company’s claim,” the review said.
The ASBFEO has also called on the regulators — including the ATO, TPB and AusIndustry — to provide further guidance to help companies understand what to look for in selecting an R&D consultant.