Officials from the Australian Taxation Office visited the Sydney headquarters of Nuix last week as part of inquiries about whether the ASX-listed software intelligence group inappropriately claimed research and development tax benefits ahead of its 2020 initial public offering.
The ATO was at the Nuix offices last Wednesday to secure files that would help its investigation, two sources told The Australian Financial Review. It is the latest of several regulatory investigations into the company, which was backed by Macquarie ahead of its listing on the ASX.
The Australian Securities and Investments Commission is making separate inquiries into the purchase of shares last year by Nuix chief executive Jonathan Rubinsztein before the company disclosed it was a takeover target. Nuix has previously said the timing was coincidental and Mr Rubinsztein was not aware of any takeover discussions when he bought the shares.
The Australian Tax Office raided the Nuix offices last Wednesday. Luis Enrique Ascui
Both Nuix and the ATO declined to comment on the tax investigation. However, sources said it related to a period before the company’s current management and was unlikely to be material to its financial position.
A 2020 presentation prepared by Macquarie and obtained by the Financial Review shows that Nuix needed to maintain a 5 per cent tax rate ahead of an IPO in December. “Nuix’s free cash flow is highly dependent on tax paid,” reads the presentation prepared by two Macquarie bankers.
“However, any budget miss will drive negative cash flow” and the gap between earnings and cash flow “may have a negative impact on the valuation that acquirers assign to Nuix”, the presentation says.
Macquarie noted the low 5 per cent tax rate was a result of paying tax on cash receipts and an R&D tax rebate. In Australia, technology companies can offset some of their research and development costs to incentivise innovation and development. Macquarie, which sold $565.7 million during the IPO, remains a 30 per cent shareholder of Nuix.
In 2021, a joint investigation by the Financial Review, The Sydney Morning Herald and The Age revealed that Nuix had claimed more than $70 million in R&D projects in early 2020. The company had claimed 55 per cent of that expenditure was in Australia, but it was closer to 9 per cent.
As it stands, the bulk of Nuix’s engineering is done in California and Pennsylvania, in the United States.
In June, Nuix said it had signed several major contracts that would push annual revenues higher. That was in part due to the ATO agreeing to sign a three-year extension to February 2026 for $6.8 million.
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