This from the Business.gov.au website that administrates the R & D Tax Incentive:
"The R&D Tax Incentive is a self-assessment programme. This means that you are responsible for assessing whether your company and the R&D you are conducting meet the eligibility requirements of the programme. These requirements are determined by legislation."
This means that any company that applies for the R & D Tax Incentive will get the payment as long as they submit the paperwork and it is not reviewed by the ATO. Instead, how the system is administered is that the ATO carries out random audits on Companies who have claimed the rebate. If during an audit the ATO believes the company did not qualify for the rebate it will ask for repayment plus interest. It can also fine and/or pursue the Company and its Directors if it feels that claim was made falsely.
Given the above, it is worth noting that in the legislation, it specifically excludes exploration activities as being eligible for the grant.
Excluded activities for R & D grants are can be found in the following guide.
Specifically, on page 29 of this guide, the following is excluded:
"[N]one of the following activities are core R&D activities: b. prospecting, exploring or drilling for minerals or petroleum* for the purposes of one or more of the following:
b. prospecting, exploring or drilling for minerals or petroleum* for the purposes of one or more of the following:
i. discovering deposits;
ii. determining more precisely the location of deposits; iii. determining the size or quality of deposits;
iii. determining the size or quality of deposits;"
MRD has claimed several years of R & D Grant that total something like $2 million, which is equal to the entire amount spent on exploration in those periods.
If you cross reference the Company's Annual Reports they make no mention of their R & D activities and yet according to their R & D grant application almost their entire expenditure has been used for R & D. Furthermore their Annual Reports say the money spent was used for the purpose of exploration which is specifically excluded from the R & D Grants.
The Company may never be audited, however, if they are it would be unlikely that the ATO would agree they are carrying out R & D when all the reports from the company say that they are carrying out exploration (prospecting). Therefore there is the potential at some stage MRD may be required to repay the grant money (plus interest).
Just giving heads up as I noticed MRD announced they had claimed another rebate and are exposed to an uncomfortable level of risk of being audited and if the ATO wants their money back and given the amount it will probably be near fatal for the company
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