Substantiating a R&D Claim
As a self-assessment program, companies may be required to substantiate their claims if selected for a compliance review by DISR or an audit by the ATO. Reviews and audits may be initiated based on a variety of factors including the quality of information provided in the R&D Application Form, company sector, underlying financial information such as quantum of R&D expenditure compared to sales revenue etc.
Programme participants are required to satisfy DISR or the ATO that they used reasonable methods to identify and self-assess eligible R&D activities and differentiate between expenditure on R&D activities and expenditure on non-R&D activities.
You can download this Guide as a PDF.
Activity-Based Record Keeping
Activity-based records should support that you cannot know or determine the outcome in advance, and you need to conduct an experiment(s) to verify that your concept is possible, the conduct of the actual progression of work and your hypothesis, and that you had a substantial purpose to generate new knowledge.
Records should also be generated to demonstrate that Supporting R&D Activities were directly related to eligible Core R&D Activities. The type of records that might be kept for activity-based records include:
- notes from meetings with project and technical staff
- business plans and approvals
- results of background research and scoping
- technical documents created at the time of the activity, detailing the hypotheses and the results of the scientific / technical experiments
- file notations and updated records to track the progress of an R&D activity.
Some examples for how you could evidence your R&D activities are below:
| Technical Planning roadmap |
This provides written evidence you’ve done your homework and should include identified milestones, what you’re going to do, how you’re going to do it, potential uncertainties & pitfalls and why you can’t use “off the shelf” technology to resolve the problem. It’s similar to a business plan, except from a technical perspective.
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| Project Reviews on a progressive basis | Upon completion of the development project (or ideally for every milestone), make note of how the actual process and outcomes reflected the roadmap. In the instance where issues arose not previously identified make note of unexpected problems, why they may have occurred and their resolution. |
| Timesheets |
This should be maintained by all technical staff and is as simple as detailing information under the following headings: – Date
– Project Name – Activity – Time – R&D related? (Y/N) – R&D Project Name |
Expenditure-Based Recordkeeping
Expenditure-based records should justify expenditure claims for eligible R&D activities and who conducted the R&D activities.
- The type of records that might be kept for expenditure-based records include:
- general ledger entries and invoices to verify the amount incurred on R&D activities and that include sufficient detail to link them to the R&D activities
- results of background research and scoping
- spreadsheets or templates that allows for eligible R&D costs to be consolidated into a format that allows for direct input into the ATO R&D Tax Incentive schedule
- financial documents including records of expenditure that include sufficient detail to link them to the R&D activities.
Other documents which could be used to provide evidence
A more comprehensive list of possible documentation includes:
- project planning documents;
- design of experiments;
- project records and laboratory notebooks;
- maintaining records of the project development such as JIRA/Trello;
- design documents for system architecture and source code;
- records of trial runs;
- progress reports and minutes of project meetings;
- test protocols, test results, analysis of test results and conclusions;
- photographs and videos;
- samples, prototypes, scrap or other artefacts;
- contracts;
- records of resources allocated to the project, e.g. asset usage logs