Developments in the 'burden of proof' in R&D Tax Incentive claims

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The R&D Tax Incentive ('RDTI') has for many years been, and continues to be, the Australian Government's principal measure to encourage industry R&D. As a program based on self-assessment, the extent of its success in encouraging R&D which might otherwise have not occurred therefore depends, in part, on how it is administered by the regulators and the compliance burden imposed on applicants (or would-be applicants) relative to the cash benefit obtainable under the program.

To understand more on this important topic, we caught up with Igor Golshtein, FTI, Managing Associate in the Allens Tax Group, where he focuses on advising large corporates on tax issues associated with strategic transactions and dispute resolution with revenue authorities.

“Earlier in my career, I had the opportunity to pursue different areas of law, but found myself drawn to tax due to its highly technical and dynamic nature, as well as my intrigue with the policy aspects of its development and administration,” Igor said.

Igor has been involved with The Tax Institute for many years now, and we’re excited to have him presenting a session at our upcoming 2021 R&D Masterclass.

“Being actively involved with the Institute is very rewarding and provides a great opportunity to exchange views and ideas with fellow practitioners and administrators on important tax issues, which helps advance our tax system more broadly,” Igor said.

This event delves into key issues in relation to recent R&D developments, including his session on the Developments in the “burden of proof’ in R&D Tax Incentive claims.

"One key area of focus and controversy with the RDTI is the quantity, quality and type of evidence necessary for an applicant to successfully discharge its burden of proving that its claimed activities were conducted as claimed and satisfy the definition of R&D Activities."


In particular, Igor said, in the context of many examinations or reviews, tensions have arisen between:

“On the one hand, AusIndustry's legitimate endeavours to (as much as possible) ensure program integrity and to assess claims efficiently, typically by requiring applicants to have maintained a comprehensive trail of detailed contemporaneous documentation; and

On the other hand, the applicant's reality that industrial R&D conducted in a commercial context (and in pursuit of commercial gain) is not always naturally calibrated to the production and maintenance of that level of documentation.”
Previously, that tension had to be thrashed out between claimants and AusIndustry in what Igor described as “effectively, a jurisprudential vacuum”.

“There simply hadn't been any Court or Tribunal decisions that grappled with or provided any meaningful guidance with respect to this tension,” he said.

“Some earlier decisions have tended to set a relatively high bar for document creation and retention for claimants aiming to successfully substantiate the eligibility of their RDTI claims, perhaps partly informed by the claimants in those cases having had pronounced paucity and deficiencies in their contemporaneous documentation. However, more recent decisions have described and elaborated upon the 'documentation requirement' with more nuance and provide guidance on how RDTI claims might be successfully substantiated, even in the face of incomplete or imperfect contemporaneous records.”

“My session will unpack the guidance provided in those more recent decisions, as well as trends in the use of lay and independent expert evidence, to assist claimants facing examination or review by AusIndustry successfully substantiate the eligibility of their RDTI claims,” Igor explained.

Catch Igor online at the R&D Masterclass on 18 August

The 2021 R&D Masterclass was previously scheduled as a hybrid event. However, with the current situation in Sydney and the recent lockdown in Melbourne we are pleased to be offering the R&D Masterclass virtually. You’ll also receive the recordings to watch on-demand post event.

So, tune in for more essential insights from Igor and a lineup of other R&D experts!

About Igor Golshtein, FTI

Copy of Firstname-Lastname-Circle-160x160 (23)Igor is a Managing Associate in the Allens Tax Group, where he focuses on advising large corporates on tax issues associated with strategic transactions and dispute resolution with revenue authorities. Igor has been involved with the Tax Institute's Victorian CPD Committee for several years and, more recently, became involved in its mentoring program (i.e. the Tax Institute Local Buddy Program). In his spare time, Igor enjoys going road-cycling with his wife, chasing after his 2 year old and 5 year old boys on their scooters and reading non-fiction.


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