If your business claims the Research and Development Tax Incentive, it's worth understanding one thing clearly: approval at lodgement isn't the same as approval forever.
The R&DTI is what the ATO describes as a self-assessment, self-registration program. In practice, that means a business decides for itself whether its activities and expenses qualify, lodges the claim, and only afterwards does the ATO, working alongside the Department of Industry, Science and Resources, check that the claim stacks up. The ATO's R&DTI compliance approach states plainly that while it's a self-assessment program, it has sophisticated systems in place to identify non-compliance, with a particular focus on larger businesses, high-expenditure claims, and claims flagged through its risk-based review processes.
That review can happen after money has already changed hands. The program is jointly run: DISR is responsible for registering companies and determining whether their activities count as eligible R&D, while the ATO checks whether the business is actually entitled to the tax offset it claimed, including whether the expenses are real and genuinely tied to that registered activity.
What the ATO is focused on right now
Each tax season, the ATO publishes guidance for tax professionals on where it's seeing problems in R&DTI claims. Its most recent guidance, What's on our radar for R&DTI claims?, flags several recurring issues worth any claiming business checking off before lodging.
The ATO says eligibility requirements need to be properly understood and applied, accounting data needs to be rigorously checked so only genuinely eligible R&D deductions are claimed, and businesses need to clearly distinguish between ordinary business-as-usual activities and activities that actually qualify as R&D. It also makes a point worth repeating: receiving a registration receipt from the Department of Industry, Science and Resources for R&D activities does not mean those activities have been approved. Registration and eligibility are two different things.
The ATO has also specifically flagged payments to associates, deductions claimed for amounts incurred but not actually paid, as an area it checks closely, detailed further in its Helping you get R&D claims right guidance.
When a claim gets a second look
Beyond routine reviews, the ATO has previously issued formal Taxpayer Alerts warning about specific arrangements it considers problematic, including claims that attempt to access the R&D tax offset in situations where it wouldn't otherwise be available, and arrangements designed to artificially inflate the size of a claim. Where the ATO sees business arrangements matching these patterns, those claims become the focus of further scrutiny.
There's also a structural reason claims can resurface years later. A legislated requirement covered in the ATO's R&D tax transparency reports means the ATO publishes data on which companies have claimed the R&DTI, but only two years after the end of the relevant financial year. Before that data is published, the ATO engages directly with the businesses involved, giving them the chance to review and, if necessary, amend their claim. If the Commissioner amends a claim following a review or audit, the published data reflects the figures from before that Commissioner-initiated amendment, a reminder that the number a business originally claimed and the number that ultimately stands can end up being different.
One related mechanism worth knowing about is clawback, which applies in specific situations, such as receiving a government grant for expenditure you already claimed an offset on, or disposing of an asset used in R&D activities. Clawback doesn't reduce the original offset, but it does add an amount back into assessable income, which is worth factoring in if your business receives other government funding alongside an R&D claim.
What good practice looks like
None of this means claiming the R&D Tax Incentive is risky if done properly, it means the burden of proof sits with the business making the claim, for as long as that claim remains open to review. The ATO's own advice for getting this right comes down to a few consistent themes: understand the eligibility rules before you claim rather than after, keep accounting records detailed enough to clearly separate R&D expenditure from ordinary business costs, and don't treat a registration receipt as the final word on eligibility.
If you're ever unsure whether a specific activity or expense genuinely qualifies, the ATO's own guidance points toward seeking advice from a registered tax agent or R&D specialist before lodging, not after a review has already started. Given that a claim can be revisited well after the refund has landed, that's not a box-ticking exercise, it's the difference between a straightforward program and a very unwelcome adjustment a year or two down the track.