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July 29, 2019 Australia’s Full Federal Court issues clarifying decision regarding R&D tax claims On 25 July 2019, Australia’s Full Federal Court handed down a significant decision on Australia’s research and development (R&D) tax incentive laws. This is a positive development for taxpayers providing clarification of how the R&D tax incentive applies, to encourage and support industry to invest in activities that may not otherwise be undertaken due to their uncertain outcomes in order to generate new knowledge (whether that new knowledge is in a general or applied form). The decision should support settling a construction of the R&D provisions which attains that objective. Key aspects of the lengthy judgment include:
The judgment should benefit taxpayers generally as the concepts apply beyond the taxpayer’s specific industry and facts. It is important to note that the case may be subject to further action as some specific matters may be returned to the Administrative Appeals Tribunal for clarification and an appeal by Innovation and Science Australia to the High Court is still possible. The judgment provides a positive endorsement of the R&D incentive for activities undertaken in Australia for generating new knowledge with uncertain outcomes. This will help resolve some of the uncertainty about R&D support in Australia and may encourage industry participants to revisit eligible activities. The decision will also give welcome support for taxpayers involved in current disputes. For additional information with respect to this Alert, please contact the following: Ernst & Young (Australia), Research & Development, Sydney
Ernst & Young (Australia), Tax and Law, Melbourne
Ernst & Young (Australia), International Tax Services, Perth
Ernst & Young LLP (United States), Australian Tax Desk, New York
Ernst & Young LLP (United Kingdom), Australian Tax Desk, London
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