AusIndustry Compliance Review

The lodgement of an application and receipt of a registration number from AusIndustry does not imply that the application has been reviewed and accepted – it is only a confirmation of processing. AusIndustry can investigate an application (a process known as a compliance review) at any time up to 4 years after it is lodged, to assess eligibility.

Although in some cases a review can be initiated on lodgement and the IR number is delayed (a pre-lodgement review), in most cases compliance reviews occur at a later date.

If a compliance review occurs, the registration (or in some cases multiple registrations) are examined to see if they comply with the eligibility requirements of the program. 

If AusIndustry categorise the application as “Getting it Right” then the IR number is issued. In prior years there was a confirmation that this had occurred, but this acknowledgement process seems to have ceased.

If AusIndustry categorise the application as “Trying to get it Right” then there will be some correspondence of that judgement, accompanied by an explanation of the issues and (especially for first time claimants) some targeted education such as a meeting or telephone call to discuss how to improve future applications. Typically, this concludes the compliance review and further formal evidence or documentation is not required.

If AusIndustry judge that the application is at high risk of non-compliance, then they will issue a Request For Information (RFI), which requires evidence to be provided within 30 days. A further period of up to 14 days may be granted on request in accordance with the Decision-making Principles. 

Although the requests will typically ask for further details around the eligibility criteria, it will also require that records of activity compliance assessment are provided. These are expected to include documented evidence of establishment that the knowledge to be sought was new (such as background research), the hypothesis to be investigated, and then the process conducted to evaluate the hypothesis (the experimental method), results and conclusions drawn. 

The compliance review may include interviews or site visits (although these have become rare in recent times), but as AusIndustry are aware that for small companies the record keeping is the weakest area, they will usually request that first.

If AusIndustry are satisfied with the self-assessment that has been disclosed as a result of the compliance review, they will issue a letter of ‘No Further Action’.

If they are not satisfied, then they will issue a Finding. This documents the concerns and recommends withdrawal of activities that AusIndustry do not believe are compliant. It does not include an assessment of expenditure – it is a pass/fail judgement. However, the judgement is shared with the ATO and is expected that activities are withdrawn and the corresponding tax return is amended.

There is an appeals process, where an internal review can be requested (a new AusIndustry assessment is made of the evidence provided), which can result in a new decision, but is most commonly a confirmation of the judgement already made. The next stage is a formal contest via the Administrative Appeals Tribunal AAT in a court of law.

A flowchart of the process is here. 

A compliance review on a single year application form can result in a multi-year assessment. It has been known for AusIndustry assessors to encourage companies to withdraw activities that are under review, to avoid a multi-year compliance review being initiated. Whilst this may be viewed as a concession by the assessment team that they will not investigate further than one year if the case is closed quickly – it can lead to companies conceding judgements that they don’t agree with because the burden of argument is too great.