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At a glance
- TA 2023/5 highlights risks with research and development (R&D) activities ultimately conducted for foreign affiliated entity(s).
- Affected taxpayers broadly include inbound life science companies that were incorporated by a foreign parent to undertake clinical trials.
- R&D tax incentive offsets may have been incorrectly claimed as Australian-owned under Australian R&D tax law, when in fact the R&D activities were conducted to a significant extent for the foreign affiliated entity(s).
- The ATO is currently reviewing these arrangements in the context of risk factors highlighted in this Taxpayer Alert.
In December 2023, the Australian Taxation Office (ATO) released a Taxpayer Alert (TA 2023/5) in relation to research and development (R&D) activities conducted by Australian R&D entities for foreign related entities. This represents the latest of the ATO's guidance which highlights the need to review arrangements involving intangible property (IP) and to consider the economic substance of arrangements in place as opposed to solely the legal form.