ATO: Hungry for feedstock

ATO: Hungry for feedstock

James Edwards and Brendan Giles, R&D Specialists, discuss the ATO's increasing interest in the R&D Tax Incentive program.

Partner, Tax

KPMG Australia


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The Australian Tax Office (ATO) is taking an increasing interest in the R&D Tax Incentive program. The ATO has recently initiated a new compliance assurance process termed a ‘Request for Information' (RFI).

This will sound familiar to those already claiming under the R&D Tax Incentive as AusIndustry (AI) have used RFIs as part of their compliance program for many years.

At present, the focus of ATO RFIs is on Feedstock. Feedstock provisions typically apply to R&D claims where the R&D activities involve the acquisition or production of goods or materials that are then transformed or processed as part of the R&D activities and which may result in one or more tangible products, including prototypes.

ATO RFIs are concerned with ensuring companies have correctly identified and assessed:

  • feedstock inputs, namely all relevant amounts relating to goods or materials, energy inputs and decline in value of assets. These must be disclosed correctly in Feedstock Input A in Part A of the R&D Tax Schedule and includes contrasting Feedstock Inputs with AASB 102 Inventories and outlining discrepancies 
  • feedstock adjustments, namely that the correct amount has been identified and adjusted for in Feedstock Adjustment in Part B of the R&D Tax Schedule and transferred to additional assessable income. A Feedstock adjustment is triggered when a tangible product is then supplied to another entity or applied for a company’s own use.

Interestingly, the ATO is also seeking to understand whether third party advice has been relied on in relation to the calculation and disclosure of Feedstock Inputs or a Feedstock Adjustment amount.

If you have any queries on your Feedstock Inputs or Adjustments or have received an ATO RFI, we would be more than happy to assist you.

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