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Can you sue your accountant for failure to claim R&D tax breaks? The answer may surprise you.


Picture this not-too-uncommon scenario: You have just found out that you can get a $50,000 cheque back at tax time this year for your research and development tax claim.

Great news. But suddenly you think back to the last few years when you were engaged in new, innovative projects and realise your folly. You missed the boat on hundreds of thousands of dollars in guaranteed government funding. Damn!

Now is this just another sorry story of missed opportunities, or is there a more serious implication that may be drawn from this scenario? Who should we blame when we miss out on rightful R&D tax funding? Ourselves? The Government? Or our Accountant?

In other words, who has the responsibility and duty of care to ensure we make our R&D tax claim at tax time?

The Government’s Response

We firstly contacted the Federal Government to get their view on this topic. AusIndustry is the joint administrator of the R&D tax programs alongside the Australian Taxation Office. When AusIndustry was contacted “unofficially” in the guise of a company that had missed out on its claim, it was somewhat apologetic for the unfortunate situation, but in no way accepted responsibility for it occurring.

It was explained to us that AusIndustry has a busy program of events scheduled throughout the year to inform the business community of its programs, including the R&D tax programs. However, it was understood that not all businesses attend these events and therefore some miss out on the information about them. We were encouraged to talk to our accountant and to see if we can come to some type of understanding with them.

So we did.

The Accountant’s Response

We spoke with a senior figure at a major accounting/professional services firm to get its, again, “unofficial” view on this.

And here is the surprising answer to our question: Maybe.

Yes, there are some circumstances where there is potential to sue your accountant for failure to claim R&D tax breaks for your company. A rather surprising response to those who would perhaps consider it unlikely that companies could have any recourse to their accountants.

But it all comes down to what type of engagement you have with your accountant/tax agent and whether there has been any misinformation, deliberate or otherwise, on the part of the accountant.

If your engagement with your accountant does include the provision of tax advice in relation to tax concessions for your company AND your accountant told you that your company was ineligible for the R&D tax breaks, when the opposite was in fact true, then we do have a potential scenario for recourse against your accountant.

However, if your engagement makes no mention for tax advice for tax concessions and your accountant simply fails to raise it with you, then it is unlikely you could take it up with them. This is because the ultimate responsibility for finding out about and making R&D tax claims still resides with none other than… yup… ourselves.

Our Responsibility

As busy as we all are just running our businesses, the reality is that it is up to us to seek out whatever incentives the Government has to help our business. This can mean looking on websites or phoning representatives and small business groups and it can also mean asking your accountant.

If we don’t ask, we don’t get, it’s as simple as that.

Now, in the case of the R&D tax breaks, this is an area your accountant should know about, so do remember to ask them about the programs. However, unlike previous years, innovators now have a simple way to double check eligibility for R&D tax breaks themselves. (Gratuitous plug alert!)

R&D SmartTax’s R&D Eligibility Wizard is a simple, online tool designed to help innovators find out their eligibility and an estimated benefit amount in minutes. (I know this because I’m the MD. If you haven’t heard about us yet, we also scored the number one spot in Anthill Magazine’s SMART 100.)

The washup

It seems that while the Government is unlikely to take responsibility for the inaction of tax-return-seekers, your accountants and advisers may be legally liable (depending on what you hired them to do). But never forget, as a business owner, the buck always starts and stops with you.

Caroline Hughes is Managing Director of R&D SmartTax, winner of Anthill Magazine’s SMART100 award for its online R&D tax tools. www.smarttax.com.au.

Image by Brian Turner