Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell is recommending a suite of reforms to the administration of the R&DTI, as part of a comprehensive report released on Thursday.
The report made 24 detailed recommendations in relation to the following key themes:
- where compliance examinations or audits are necessary, they should take place as close as possible to the first year of registration of a project
- guidance material needs to be comprehensive, clearer and up to date and developed in consultation with small business
- agency record-keeping requirements be simplified and take into account commercial practicality for a small business
- small business must be assisted to help identify and retain professional and responsible R&D consultants
“It is clear from our investigation that many small and family businesses rely on the R&DTI to help fund innovation,” Ms Carnell said.
“That’s why it is vital to have a transparent and predictable system that works for those businesses conducting research and development.”
The ASBFEO found that small and family businesses were mostly subjected to retrospective examination and audit by the two agencies responsible for the delivery of the program – the Department of Industry, Innovation and Science (AusIndustry) and the Australian Taxation Office (ATO) – which has had a devastating impact on the businesses involved, with some facing financial ruin.
“In all cases, this compliance activity was retrospective and commenced several years after the relevant R&D was undertaken and the R&DTI refund received and spent.
“Often these affected businesses were required by the ATO to repay the R&DTI in full, with a severe penalty applied.”
Ms Carnell pointed out that most of these businesses were genuine in their belief they were undertaking R&D, judging that “their claims were totally justified and they had already invested the money back into the business”.
According to the ombudsman, both the ATO and AusIndustry have heard these concerns and have pledged to update their approach to R&DTI compliance checks to ensure better communication guidance and education.
“This needs to be embedded consistently across both agencies’ networks and the ATO and AusIndustry should apply this updated approach retrospectively to the businesses that are in the midst of an audit or examination,” Ms Carnell said.
“The purpose of the R&DTI is to incentivise businesses to invest in research and development.
“For Australian small businesses to continue to thrive, it’s critical they are supported in their R&D endeavours to drive innovation and growth.”