Horizon Europe works on a 7-year cycle. Framework Program 9 (FP9) is the current version, running from 2021-2027. As institutions either conclude FP9 or look to begin participating in Horizon Europe projects, many will encounter European Commission financial reporting and audit requirements that differ from the Australian grant compliance frameworks they are familiar with.

Independent audits can play an important role in demonstrating that project expenditure has been properly managed, appropriately documented, and claimed in accordance with grant requirements. Early preparation can help universities reduce compliance risk, avoid financial corrections, strengthen governance, and approach project reporting with confidence.

Horizon Europe audit quick facts

Will my university need a Horizon Europe audit?

For some Horizon Europe projects, beneficiaries are required to obtain a Certificate on the Financial Statements (CFS).

Under the general Horizon Europe requirements, a CFS is required where the total European Union contribution claimed by an individual beneficiary or affiliated entity reaches or exceeds €430,000 over the life of the project. The threshold is assessed separately for each beneficiary or affiliated entity and not at the overall consortium level. A mandatory CFS is generally submitted once at the end of the project as part of the final reporting process. The cost of a mandatory CFS is generally eligible for reimbursement under the grant, subject to the applicable grant requirements.

As university participation in Horizon Europe grows, particularly following Australia’s association arrangements, many universities may find themselves exceeding this threshold for the first time.

What does a Horizon Europe audit involve?

A Horizon Europe audit examines the financial information submitted by a beneficiary in support of grant claims.

Depending on the nature of the project, the auditor may review:

The audit focuses on whether costs have been correctly calculated, recorded in the beneficiary’s accounting records, and supported by appropriate evidence. The auditor reports their findings through the prescribed European Commission framework, while the European Commission ultimately determines cost eligibility and any financial corrections.

Why audit readiness matters

While a mandatory CFS is generally only required at the end of a project, the supporting evidence required for the audit must be generated and retained throughout the project lifecycle.

Universities that wait until final reporting often discover gaps in documentation that can be difficult, costly, or impossible to rectify years after expenditure has been incurred.

Early preparation helps institutions:

• protect valuable research funding
• identify potentially ineligible costs before submission
• strengthen time-recording and personnel cost documentation
• reduce the risk of funding clawbacks or financial corrections
• demonstrate sound governance and financial oversight
• establish repeatable processes for future Horizon Europe projects.

Audit readiness should therefore commence at project establishment rather than when a project approaches completion.

Preparing for a new compliance environment

Horizon Europe compliance is rarely the responsibility of one team. Research Offices, Finance teams, Procurement personnel, Payroll teams, Principal Investigators, and Project Managers may all contribute information that supports project expenditure claims.

Institutions should consider:

• reviewing the financial requirements contained in each grant agreement
• determining early whether a CFS is likely to be required
• assigning clear ownership for compliance activities
• mapping Horizon Europe cost categories to internal finance systems
• documenting personnel cost and time-recording methodologies
• implementing appropriate procurement and subcontracting controls
• maintaining a central repository of audit evidence
• performing periodic project reconciliations and internal compliance reviews
• budgeting for the cost and timing of independent audit requirements.

Universities that establish these disciplines from project commencement are generally better positioned to navigate both project reporting requirements and independent audit procedures.

Why this matters for universities

Many universities already manage complex assurance requirements associated with government research funding, international grants, and regulatory reporting obligations.

However, Horizon Europe introduces a distinct set of European financial compliance requirements that may be unfamiliar to research and finance teams.

As participation in Horizon Europe expands and funding levels increase, universities are likely to experience greater scrutiny over cost eligibility, documentation, personnel costs, and supporting evidence. Building capability now can help institutions scale their participation in future European research programs while protecting valuable funding outcomes.

How SW can help

SW supports universities, research institutions, and complex grant-funded organisations across Australia with assurance, compliance, and governance requirements.

Our support can include:

• audit readiness assessments for Horizon Europe
• compliance reviews and gap analyses
• review of financial systems, controls, and documentation
• guidance on eligible cost requirements
• review of personnel costs and time-recording arrangements
• procurement and subcontracting compliance reviews
• independent Horizon Europe audits and CFS engagements
• training for Research Office, Finance, and Project teams
• ongoing compliance and reporting support throughout the project lifecycle.

SW already supports universities, research institutions, and complex grant-funded organisations across Australia. Our practical experience, combined with a strong understanding of Australian and EU compliance frameworks, enables us to help you align your grant management practices with Horizon Europe requirements and ensure your projects are audit-ready from day one.

Contributors

Matthew Paull | Associate Director, Assurance and Advisory Services

The post Horizon Europe audits explained & what universities need to know appeared first on SW Accountants & Advisors.

That combination of large funding at stake, personal VC certification, and specifications that change every year is exactly why HERDC deserves the same governance and control discipline as any other significant regulatory submission. And as research funding increasingly flows across borders, from Europe and the United States as well as Canberra, universities now face not one assurance obligation, but three.

Why the risk is rising

HERDC data is pulled together from Research Offices, Finance, Faculties, and Shared Services, drawing on multiple systems and interpretations of what counts as eligible R&D income. The specifications are updated annually, usually released in draft each December and confirmed the following February, so last year’s approach is rarely a safe guide to this year’s return.

The risks we see most often are:

• misclassification of income across the four HERDC categories
• inconsistent interpretation of eligibility, particularly around shared income, affiliates, and subsidiaries, an area the specifications have repeatedly clarified
• thin supporting evidence for income included in the return, reinforcing the principle that the contract is king, if it does not read as research, it is not
• manual, key-person dependent extraction and reconciliation processes
• limited executive visibility of where the real reporting risks sit.

Left unchecked, these translate directly into funding adjustments, audit findings, regulator challenges, and reputational exposure.

Our view

Leading universities now treat HERDC as a high-risk external reporting process, not simply a funding exercise. Management should be able to demonstrate clear accountability for HERDC decisions, consistent application of the specifications, effective controls over data integrity, robust audit trails behind eligibility calls, and genuine independent challenge before the Vice-Chancellor signs.

Independent assurance is what allows executive teams and Boards to say, with evidence, that reported research income is accurate, compliant, and defensible.

Three funding streams, three different assurance obligations

This is where universities often need help separating the mandatory audit from the broader assurance they may want, and where SW can support the full research funding picture. As research partnerships globalise, more institutions now carry all three of the obligations below at once.

HERDC audit — the mandatory compliance audit (Australian funding)

Every provider must obtain a Special Purpose Audit Report under ASA 800 certifying that Category 1–4 R&D income in the return is correct, attributed to genuine R&D and to the right category, and identified by transparent transactions. The report is due to the department by 30 June each year. SW audits HERDC for clients including Deakin University, La Trobe University, Swinburne University, and Victoria University, and also runs pre-submission preparation and staff training workshops to lift return quality before the audit even starts.

Horizon audits — certifying EU-funded research spend (European funding)

Where a university draws funding from the EU’s Horizon Europe (or legacy Horizon 2020) programme, a Certificate on the Financial Statements (CFS) becomes mandatory once the EU contribution to a single beneficiary reaches €430,000.

This is a different animal to HERDC as it certifies that declared costs are real, eligible, and properly supported, delivered as an agreed-upon-procedures engagement (ISRS 4400) rather than an ASA 800 income audit, and without it, the European Commission can withhold the final payment. With Australia’s association to Horizon Europe concluded in 2026 and direct Pillar II funding flowing from January 2027, far more Australian universities will soon cross the CFS threshold.

Uniform Guidance audits — acquitting US federal research dollars (United States funding)

Australian universities are significant recipients of US Government research funding, grants from agencies such as the NIH, the Department of Defense and the National Science Foundation, received directly or as pass-through funding.

Any institution that expends US$1m or more of these federal awards in a year must obtain a Single Audit under the US Office of Management and Budget’s Uniform Guidance (2 CFR Part 200, Subpart F) a threshold recently lifted from US$750,000. Unlike HERDC, this applies an unfamiliar US framework — US GAAP reporting, cost-eligibility, and internal-control testing under US auditing standards — to funds administered a long way from Washington.

SW is the Uniform Guidance auditor for leading universities across Australia and New Zealand, delivering each engagement locally, while leveraging the extensive expertise, methodologies, and practice aids of our US partner firm, which conducts more than 100 Uniform Guidance audits internationally each year.

In short, HERDC assures research income for Australian block-grant funding. A Horizon CFS assures research expenditure for EU grant funding, and a Uniform Guidance Single Audit assures research expenditure for US federal funding. Universities with strong international research partnerships increasingly need all three.

The Horizon market is about to open & universities will need help

Until now, Horizon audits have been a niche requirement for the handful of Australian universities drawing EU research funding under third-country rules, where entities typically had to self-fund their participation. That’s changing fast, and it changes the size of the opportunity.

In June 2026, the EU and Australia concluded negotiations on Australia’s association to Horizon Europe — the EU’s €93.5bn (≈A$155bn) research and innovation programme. Australia will associate to Pillar II, worth more than €53.5bn, covering digital and industry, space, climate and energy, health, food, and the bioeconomy, priorities that map directly onto Australia’s own National Science and Research Priorities. From January 2027, under a transitional arrangement, Australian universities move from third-country status to being treated as eligible entities from an associated country, meaning direct, routine EU funding on the same terms as EU member states, including the ability to lead consortia.

The signal is already there. Australian organisations have taken part in 239 Horizon Europe projects to date, with a 24.39% application success rate, close to one in four. The Group of Eight has stepped in to fund the association fee, and universities from Sydney to Melbourne have publicly welcomed the move. As direct funding flows from 2027, the number of Australian institutions crossing the €430,000 CFS threshold, the point at which an independent Certificate on the Financial Statements becomes mandatory before the EU releases final payment will grow materially.

What this means for universities

More EU funding is unambiguously good news, but it brings an assurance obligation many Australian research offices have not had to manage at scale before. A CFS is not a HERDC audit and not a standard financial statement opinion, it’s an agreed-upon-procedures engagement against the European Commission’s prescribed template, certifying that declared costs are actually incurred, properly recorded, and eligible under the grant agreement. Get the documentation wrong and final payment can be withheld or clawed back.

How SW can help with the Horizon opportunity

SW can help universities:

• get ahead of the threshold — flag likely CFS obligations early in a project’s life and budget for them (the audit cost is itself an eligible, reimbursable project cost), so certification isn’t a scramble at final reporting
• build cost-eligibility discipline up front — align time recording, cost allocation, and documentation to EU grant agreement rules from day one, rather than reconstructing evidence years later
• deliver the CFS itself — independent, APES 110–compliant certification against the Commission’s template, drawing on our existing Horizon and Uniform Guidance experience
• join the dots across research funding — few advisors can sit across HERDC, US Uniform Guidance, and EU Horizon assurance under one roof. We already do, which lets research-finance teams consolidate their external assurance with a single sector specialist.

The universities that plan for this now, ahead of the 2027 funding switch, will avoid the late-stage documentation problems that catch first-time EU grant recipients. That’s the conversation we should be starting with our Research Office and Research Finance contacts today, on the back of the HERDC relationships we already hold.

How we help with HERDC assurance

Our independent HERDC assurance review sits alongside, not instead of, the mandatory audit, and covers:

• governance and oversight — accountability, executive and committee oversight, certification process, and escalation
• compliance — alignment to current specifications, eligibility methodology, consistent categorisation, and supporting documentation
• controls and process — end-to-end reporting, review and approval, reconciliations, and audit readiness
• data integrity — source-to-submission traceability, data quality, manual adjustments, and the reliability of management reporting.

Why SW

We know research funding assurance because we live in this sector. Our dedicated Education Industry Group has more than 50 years’ experience and has worked with 35 of Australia’s major universities.

• Laura Toscano, Director — 17 years in internal audit, risk, and compliance, leading HERDC audits across Deakin University, Swinburne University, La Trobe University, and Victoria University. Laura is a 2026 finalist in the Women in Banking & Finance awards for Risk, Regulation & Compliance and is an APRA-approved independent expert on governance and risk remediation, the exact skill set HERDC governance assurance calls for.
• Matt Paull, Associate Director — 15 years specialising in education audit, with HERDC audits for Deakin University, La Trobe University, Victoria University, and Swinburne University, as well as HERDC preparation support and staff training workshops. Matthew also manages Uniform Guidance audits across Australia and New Zealand.
• Brent Sheers, Partner — Assurance & Advisory — 12+ years delivering external audit, assurance, and financial due diligence across the listed, education, and not-for-profit sectors, and the SW Engagement Partner on our Uniform Guidance and European Horizon audits for universities. A Registered Company Auditor with both ASIC and Fairwork, Brent also sits on the Board and Finance & Audit Committee as an independent director of both a Melbourne based disability services organisation and independent girl’s school, giving him a first-hand read on exactly what Boards and audit committees expect from their auditor.
• Steve Allan, Partner — 30 years advising the sector and National Chair of our Education Focus Group, providing commercial, tax, and structuring advice to more than 30 Australian universities. Steve’s deep relationships across research and finance leadership open the door for the assurance conversation.

We also stay close to the sector’s own forums, presenting HERDC and technical updates through ARMS, AUSFOG, and university CFO and tax manager networks, so our advice reflects where the specifications and the sector are actually heading, not just where they’ve been.

Contributors

Matthew Paull | Associate Director, Assurance and Advisory Services

The post Research income & research funding assurance appeared first on SW Accountants & Advisors.

It has become increasingly important for Australia to attract for R&D investment on the global stage. Over 20 jurisdictions, including Singapore, the UK and numerous European countries already have incentives that offer concessional tax treatments to IP-derived profits.

The Patent-Box regime was first announced in the 2021-2022 Budget, as part of the Federal Government’s efforts to incentivise R&D and commercialisation of innovations in the medical and biotechnology sectors, as well retaining associated patent profits in Australia.

Following a public consultation in 2021, legislation has now been introduced into the House of Representatives.

What is the Patent Box regime?

As part of the new legislation, income directly attributable to eligible patents will benefit from a reduced concessional tax rate of 17%.

This only applies to patents granted after 11 May 2021 and for income years starting on or after 1 July 2022, to the extent the underlying R&D has been undertaken in Australia. The decision to include patents applied for before the Patent Box Federal Budget announcement is one of the positive changes resulting from consultation and caters for the significant R&D generally still required to be performed after the lodgement of the patent application. 

Who will be eligible?

Businesses in the medical and biotechnology sector who hold patentee rights over an eligible medical or biotechnology patent linked to a therapeutic good included on the Australian Register of Therapeutic Goods (ARTG) are able to benefit from the new Patent Box initiative.

In order to qualify, a business is required:

• to be an Australian resident or have a permanent establishment in Australia, and
• the patent must be either an Australian standard patent, a United States Utility Patent or a European Patent.

This is a positive expansion on the original plan of only allowing Australian standard patents. In around 97% of cases, Australian businesses would file in at least one of these three jurisdictions. The coverage provided by this change would therefore reduce the additional compliance burden when accessing the Patent Box regime.

What types of income can be included?

The concessional tax treatment for eligible patent is broadly available to income from:

• the sale of a therapeutic good linked to the patent, royalties or license fees related to the patent
• a balancing adjustment event in relation to the patent, and
• compensation for patent infringements.

For certain types of expenditure, income arising prior to being granted a patent right or earlier sale may also be included.

How would the eligible income be calculated?

In order to comply with OECD standards, the patent box must follow a nexus approach. The available benefit is decreased, where the R&D is outsourced to a related party overseas, or an acquisition of IP developed by another party.

This is achieved by the introduction of a formula for calculating an “R&D fraction”, which determines how much of the income linked to the patent is eligible for the 17% effective tax rate.

The nexus approach aims to ensure the benefit provided is proportional to the R&D that the company has undertaken in Australia, leveraging the legislative framework of the R&D Tax Incentive as a basis for determining qualifying R&D expenditure.

The intent of using existing R&D concepts and definitions is to reduce compliance costs and utilise records already required to be maintained for demonstrating eligible R&D activities and expenditure.

What is the timing of the Patent Box regime?

To access the Patent Box regime, a company must elect for the Patent Box regime to apply. This is an irrevocable decision that would apply to all the company’s eligible medical and biotechnology patents on a prospective basis.

The timing for this election is crucial, as it is generally not possible to make a retrospective Patent Box election. Also be aware that once a patent is revoked or ceased, a company will no longer be able to access the Patent Box regime.

Positive outcome for innovation

R&D activity contributes to high-skilled, high-value jobs and provides significant rewards, spillovers and flow-on effects across businesses, sectors and the economy. Whilst Australia provides the R&D Tax Incentive to encourage R&D being undertaken locally, more than 20 other countries now provide a Patent Box regime. It is hoped that with Australia following suit, there will be an increase in local R&D investments and a reduction in the offshoring of IP.

The Australian Patent Box is an important measure to drive and reward investments in medical and biotechnology innovation in Australia. As a result, businesses will be hoping that Parliament passes the Bill this month, or at least prioritises its re-introduction after the Federal election in May.

What action should I take?

Now is the right time to start getting familiar with these measures given the Patent Box regime includes a number of income rules related to the proportion of income attributable to a patent, as well as mechanisms to provide preferential tax treatment only to the extent of the taxpayer’s Australian R&D activities, You should consider how your activities are structured to ensure eligibility and maximise your optimum benefit.

How can SW help?

With legislation now before Parliament, the ATO is in the process of developing more detailed guidance ahead of the first intended financial year of operation. SW will be releasing additional information once available.

SW has a specialist R&D Tax and Government Incentives team with a proven track-record in developing suitable governance and record keeping processes, similar to the ones required when applying the Patent Box. If you would like any further information, please contact a member of the SW tax or R&D Tax and Government Incentives team.

Contributors

Thomas Demel

The post Australia’s Patent Box Incentive – What are we expecting? appeared first on SW Accountants & Advisors.

Compliance obligations apply from a wide range of bodies at various times in the year, including:

• Australian Taxation Office
• income tax returns
• FBT returns
• GST returns
• superannuation payments and reporting
• Australian Securities and Investments Commission (ASIC)
• Australian Securities Exchange (ASX)
• financial Institutions
• industry bodies and regulators
• State Revenue Offices(s)
• Land Titles Offices(s)
• Australian Charities and Not For Profits Commission.

Our team has both the experience and adaptability to deal with your evolving needs as compliance becomes more complex.

We work with you to help you understand your requirements and establish lodgement deadlines. We then provide the accounting and taxation services to ensure you meet your reporting obligations.

Our compliance services are designed to work with you efficiently so that you can continue focusing on your business while we take care of the back office requirements.

We also utilise the latest technology where appropriate to make compiling your documents as pain free as possible. Our team provides advice to maximise your position while ensuring you meet your obligations.

The post Accounting & compliance appeared first on SW Accountants & Advisors.

• identifying and scoping eligible R&D activities ​
• preparing the R&D Application for registration of R&D activities ​
• calculating eligible R&D expenditure and preparing the R&D Tax Schedule to claim the tax incentives ​
• assisting with R&D governance and documentation processes ​
• conducting R&D training and governance workshops.​

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