The recent decision of the Administrative Appeals Tribunal (Tribunal) in Moreton Resources Ltd v Commissioner of Taxation [2024] AATA 1157 is a salutary lesson on the importance of focussing on both the R&D technical issues and the administrative requirements of the Taxation Administration Act when dealing with disputed R&D claims.  

You will recall that the Federal Court decision in Moreton Resources Limited v Innovation and Science Australia [2019] FCAFC 120 is one of the few cases that has been favourable to the taxpayer. In that case, the Court remitted the matter to the Tribunal for determination of whether the taxpayer’s activities were eligible supporting R&D activities in accordance with the Court’s findings. 

Whilst the Tribunal accepted that certain activities were supporting R&D activities, the claim failed in relation to the 2013 year as the Tribunal held that it did not have the jurisdiction to hear the taxpayer’s claim in relation to the 2013 year due to the following procedural requirements not being met: 

(a) No Objection decision: the ATO had not made an objection decision that was reviewable by the Tribunal.

(b) Lapsed Notice: The original s 14ZYA(2) notice lodged by the taxpayer on November 17, 2022 was put in abeyance on December 12, 2022 and lapsed as it remained inactive for over 60 days without activation.

(c) Invalid reactivation attempt: The taxpayer’s attempt to reactivate the original notice on December 27, 2023 failed as it did not clearly refer to the original objection or s 14ZYA.

Implications

The principles regarding supporting activities upheld by the Federal Court in Moreton Resources Limited v Innovation and Science Australia [2019] FCAFC 120 continue to have precedential value.

However, the Tribunal decision means that Moreton Resources will need to consider the possibility of submitting a new objection notice for the 2013 year to comply with administrative requirements and potentially restart the review process. Of course, the Commissioner could deny the out of time objection and we could be back in the Tribunal again trying to sort that out. The gift that keeps on giving!

Lessons for Advisers

The procedural missteps in this case highlight the complexities in challenging assessments. It is critically important for taxpayers and their advisers to meticulously follow through on all administrative requirements.

Please don’t hesitate to reach out if you have any questions about this case or require assistance with any procedural issues in respect of R&D or other tax matters.