Engaging a tax incentive specialist specialist
Many companies choose to engage a specialist R&D Tax Incentive consultant to prepare their tax incentive application. This is generally a wise move for a number of reasons. A thorough understanding of the R&D Tax Incentive legislation and the AusIndustry guidelines are required to achieve a compliant application. Even assuming that you arrive at a correct understanding, it is very time-consuming – is it a good use of your time?
Your consultant will be knowledgeable in the requirements of the RDTI program, but will not understand your particular R&D. Hence if your application is being prepared by an external consultant, that consultant will need a reasonable R&D technical summary covering your R&D activities.
If suitable documentation already exists, that is great – it means that less of your time is needed. Alternatively, the consultant will typically sit down with you and make detailed notes. This is often enough to draft a reasonable technical description. The consultant may also be able to work with your internal technical documentation. The aim should be to minimise your time whilst achieving a good outcome.
However, to get the most out of this technical information (however it is presented), the consultant should have sound technical skills – see R&D consultant understand your R&D? This particularly true if the technical information is in the form of internal technical reports.
You may be thinking that in using a consultant, you have just swapped one problem for another. However, it is much easier for a consultant with sound technical skills (and STEM qualifications) to understand your R&D in summary, than it is for you to adequately understand the RDTI requirements. The other thing to remember is that the consultant is more concerned with the compliance of the claimed R&D than actually explaining the R&D.
Provide your consultant with a good R&D technical summary
If possible, it is good to give your R&D Tax Incentive consultant a good summary of the R&D your company has performed. If the information given to the consultant is pitched at the correct level and is (relatively) free of jargon, a competent R&D Tax Incentive consultant should be able to produce a coherent application.
The consultant only needs a basic understanding of your R&D. What they will be mainly interested in is:
- The technical problem being solved, and the knowledge gap
- Why experimentation was needed
- What experiments were conducted
- What was the result of the experiment(s)
Where things go wrong with your R&D technical description
Many companies, however, treat the R&D Tax Incentive application as a distraction and only give the consultant technical material that they already have.
This usually means project plans and technical reports of various kinds, which were typically written for a completely different purpose (and audience). How the consultant deals with this will tell you what sort of consultant you are dealing with.
Many consultants will simply pull various pieces of description together from various sources without sufficient consideration of whether the resulting description is coherent. Given that the consultant may not even understand the concepts they are describing, they are unlikely to spot problems with readability. A good consultant will connect the concepts being described in a way that makes sense – if they have the required technical skills.
How to head off problems
A good consultant will ask enough questions and request enough additional information to be satisfied that they have an adequate understanding of the R&D activities being claimed. Only then can the consultant draft a clear, coherent and informative explanation for the incentive application that explains how that R&D is eligible. For this reason, if the consultant doesn’t have a technical background (science, technology, engineering, maths – STEM), you should look elsewhere.
Above all – review the drafted application before it is submitted, as you are ultimately responsible for it. If the application doesn’t make sense to you, it certainly will not make sense to AusIndustry.