I’ve helped many clients respond to ATO and AusIndustry R&D audits over my time working in the field and I’ve picked up plenty of knowledge along the way as to how get the best outcomes.

These are my insights into how the audit process generally works when being audited on the technical side of an R&D claim by AusIndustry.



The title says it all here really.

This is when someone at AusIndustry simply reviews the R&D registration form that you have lodged and advises whether it meets the criteria based on the information they can assess in the form or whether there are some areas that may need some further clarification.

If you get the green light at this stage, AusIndustry will send out a courtesy letter just letting you know that they’ve reviewed it and that you’re all good.

This is obviously a very nice letter to receive and lets you know you’re on track.

Getting an audit process finalised at this stage is the ideal outcome for everyone, but if they want to see a bit more, they will move onto stage 2.



AusIndustry have changed their process in recent years and now tend to put much more emphasis on educating claimants registering for the R&D tax incentive rather than a lengthy back and forth dialogue requesting stacks of documentation.

I, for one, am a huge fan of this change and very pleased that they’ve gone down this path, because it’s often at this stage that an AusIndustry assessor can speak to the client and really understand the project in great depth from a short conversation as opposed to needing to read pages and pages of written material only to still have further questions.

In an educational visit, two assessors from AusIndustry will come out to your business premises for a meeting and will often physically have a look at the R&D projects you’ve conducting and then sit down for a discussion.

They may outline areas of concern that they have about the R&D registration and also give you the chance to respond to any questions they have and to further enlighten them as to how you have reached the conclusion that what you’re doing is eligible R&D.

Most audit processes that I’ve been involved with conclude at this stage and AusIndustry will then provide some formal feedback as to how they’ve assessed your claim and where they think the risk areas lie and how you might be able to improve any future claims you decide to lodge going forward.

If this doesn’t end the process, though, we may be required to respond to a formally written request for information.



At this stage of the audit process, things have moved into a more formal phase and AusIndustry will put down in writing where they are having issues and will request from you substantiating evidence of your R&D projects and your written responses as to your experimental process, the new knowledge you’ve attempted to generate and why outcomes could not be known or determined in advance.

When we get to this stage, we’re getting to the hairy end of the process and there can be significant time and resources required to respond to a request for information, however, it’s always worth taking the time to do so and ensuring you meet any deadlines set in order to give yourself the best chance of getting the claim approved. I have never had a client move beyond this stage of an audit, thankfully, but I do know if AusIndustry aren’t satisfied then they will commence a formal audit of your R&D and then things start to get pretty serious.



At this stage of an audit process, a thorough examination procedure is commenced and this is where you will likely be requested to appear at an Administrative Appeals Tribunal (AAT) hearing to argue your case against AusIndustry’s assessors who have reached a decision that what you’re doing doesn’t qualify as R&D and the reasons will have already been made very clear to you.

I haven’t been involved in such a formal audit and would prefer not to get to this stage with any client I work with simply by advising clients up front if I do not believe that what they’re doing qualifies as R&D, however, we must always be prepared for any eventuality and if I do ever have a client get to this stage, I will be fully prepared to assist in the best way I possibly can.


So, this is how an R&D audit process may work should you ever become involved in one.

Hopefully you don’t have this experience and your interaction with the R&D program is a positive one throughout, however, it’s always good to be aware of any possibilities that may lie down the track.