STEP 3: Is My Work Eligible?

Your research and development work needs to be recognised as an eligible R&D activity.

Eligible R&D activities are broken into two categories: 
Core R&D activities and Supporting R&D activities

Core R&D Activities

core activitiesCore R&D activities are the part of the work where the company tries to do or make something that hasn’t been done before and cannot be done without experimenting  .

To prove it, the company must aim to create new knowledge  by following a path from concept to conclusion with measurable experimental outcomes to support the reasons for the conclusion.

Core R&D activities could be, for example, the testing of a new or improved product, device, process or service.

A business must have at least one core R&D activity in order to claim.

To determine whether your work is eligible as a Core R&D activity, see the Core R&D Activity tool in the references below.

Supporting R&D Activities

supporting activitiesSupporting R&D activities  are company activities that support core R&D activities.

These activities need to have a direct, close and relatively immediate relationship to the core R&D activity. If these activities are involved in producing goods or services the dominant purpose  of the activities must also be to support your eligible core R&D activities.

To determine whether your work is eligible as a Supporting R&D activity, see the Supporting R&D Activity tool in the references below.

 

Advance Findings

advanced findingsAdvance Findings  are a feature of the R&D Tax Incentive that can provide companies with certainty about whether their R&D is eligible before they incur the costs of conducting the activities, or if they have already conducted the activities before they register them and include the costs in their company returns. Companies apply to AusIndustry  for a decision on the R&D activities and, if successful, a Finding is issued that is binding on AusIndustry and the Australian Taxation Office for the year in which the R&D is conducted and for up to two subsequent years (if the activities are being conducted over multiple years).

You must submit an application for an Advance Finding before the end of the income year in which the activity was conducted. If the activity was conducted in the last income year, you should proceed to register the activities you have assessed to be eligible.

A finding is not the same as, or a substitute for, registration of R&D activities. In order to claim the R&D Tax Incentive, you still need to register eligible R&D activities annually with AusIndustry within 10 months of the end of the income year that the activity was conducted.

 

Activities excluded from being Core R&D

Excluded Core ActivitiesSome activities are explicitly excluded from being eligible core R&D activities . However, these activities could still be eligible supporting R&D activities as long as they were undertaken for the dominant purpose of supporting an eligible core activity and have a direct, close and relatively immediate relationship with that activity.

Examples of excluded core activities include:

  • management studies;
  • market research;
  • prospecting; and
  • research into the arts.

A full Exclusions List is in the references below.

 

 

Find an example relevant to your industry

 

  

BAKING STUFF (Core R &D Activity)

1
bread and fish oilBakingStuff is a small company producing specialised bread products that wants to create a new healthy product by introducing fish oil to its wholegrain bread line.
2
bread and fish oilAdditives in food production can be introduced as tiny particles or droplets surrounded by a coating. In this case, the company realised after undertaking research that the technology to add fish oil to processed wet mix foods either didn’t exist or wasn’t available.
3
bread and fish oilThe company decided to undertake a series of tests, involving varying the recipe, mixing speeds, baking times and temperatures to introduce coated fish oil droplets to wholegrain bread without ruining the taste of the product.
4
bread and fish oilBecause this experimental process involved experimental testing and evaluation, and would create new knowledge that couldn’t be discovered otherwise, BakingStuff decided that it was eligible as a core R&D activity and could be registered under the R&D Tax Incentive.

BAKING STUFF (Supporting R&D Activity)

1
bread and fish oilBakingStuff realised that the research they did to see if the technology or know-how already existed wasn’t eligible for R&D support as a core R&D activity. However, because they used this work to help develop their experiments, it had a direct, close and relatively immediate relationship with the core R&D activities and the company registered this activity as a supporting R&D activity.

Biofnatics (Core R&D Activity)

1
bread and fish oilBiofnatics developed an improved biodegradable coronary stent device that required clinical trials to prove and test the effectiveness.
2
bread and fish oilThe results of the trials could not be known in advance and resulted in new knowledge. Biofnatics conducted Phase I clinical trials in Australia before progressing to Phase II trials.
3
bread and fish oilThese trials required a larger and more diverse sample population size than was available in Australia, so they had to go overseas. The Phase II trials could still be supported by the R&D Tax Incentive but Biofnatics was required to obtain an Overseas Finding from AusIndustry before it could claim its work overseas.
4
bread and fish oilBecause this process involved experimenting, and evaluation and created new knowledge, Biofnatics decided that it was eligible as a core R&D activity and could be supported by the R&D Tax Incentive.

Biofnatics (Supporting R&D Activity)

1
bread and fish oilBiofnatics realised that the actual manufacture of trial samples of the new stent was not a core R&D activity as it used a well-known process. However, because the new stents were needed for, and directly related to, the clinical trials, the company registered this activity as a supporting activity.

Enviroloo (Core R&D Activity)

1
bread and fish oilEnviroloo is a small company with a turnover of around $5million. The company had previously developed a non-toxic chemical toilet system for use in eco lodges and holiday houses that did not use water.
2
bread and fish oilEnviroloo decided to explore growth opportunities by developing the product for the medium density residential market. Enviroloo undertook internet and literature searches and consulted with experts before determining that the knowledge of how to develop a bigger system (for around 1,000 toilets) that used no water did not exist.
3
bread and fish oilSeveral technical challenges needed to be overcome before it could be deployed on a larger scale. To address these challenges, Enviroloo developed and tested 10 interconnected toilets that used an air seal and suction system to evacuate the chemical waste to an onsite processing unit.
4
bread and fish oilBecause this non-water based flushing system did not exist and the new suction system and the onsite processing unit required testing and development, Enviroloo decided that it was eligible as a core R&D activity to be supported by the R&D Tax Incentive.

Enviroloo (Supporting R&D Activity)

1
bread and fish oilEnviroloo realised that the research it did to investigate the technology wasn’t itself an R&D activity. However, because it was carried out solely to support the core activity and is directly related to their core R&D activity, Enviroloo registered it as a supporting activity.

WindWake (Core R&D Activity)

1
bread and fish oilWindWake specialises in wind data analysis and wind flow modelling technologies.
2
bread and fish oilThe company decided to develop new wind farm noise modelling software that helped to analyse, predict and ultimately create noise reduction scenarios for wind farms.
3
bread and fish oilWindWake realised that the product would require the development of algorithms that did not currently exist and that would need extensive testing in both simulated and field situations to be able to have commercial applications.
4
bread and fish oilBecause this process involved experimental testing, and evaluation and created new knowledge, WindWake decided that it was eligible as a core R&D activity and could be supported by the R&D Tax Incentive.

WindWake (Supporting R&D Activity)

1
bread and fish oilWindWake’s project involved extensive field testing. This work required a lot of logistical activity that, whilst not part of the testing or trials, was carried out solely to support the core R&D and directly related to the R&D.
2
bread and fish oilWindWake registered this as a supporting activity for assistance from the R&D Tax Incentive. This included the costs of equipment hire and personnel.

ColdTec (Core R&D Activity)

1
bread and fish oilColdTec is a small company that develops innovative ICT service products. The company developed a new product that uses a cloud computing solution and new image compression algorithms to detect when products in commercial and domestic fridges need to be replaced.
2
bread and fish oilThe company conducted a literature and technology review and worked out that no algorithm capable of performing the necessary image compression within space and memory constraints existed.
3
bread and fish oilIt needed to develop and test the new algorithm to ensure that it worked reliably and within the technical limitations of its product. Similarly, ColdTec needed to test both the algorithm and cloud based solution to ensure that the product could recognise both individual products and when they needed to be replaced.
4
bread and fish oilBecause this process involved experimental testing, and evaluation and created new knowledge, ColdTec decided that it was eligible as a core R&D activity and could be supported by the R&D Tax Incentive.

ColdTec (Supporting R&D Activity)

1

bread and fish oilTo successfully run its experiments on the new algorithm, ColdTec also needed to develop software that could read, compress and upload images onto its server. It did this using existing technology. Because this development directly enabled the experiments to be conducted, it was directly related to the core R&D activity and ColdTec self-assessed that it could be registered as a supporting R&D activity.

Rutimech (Core R&D Activity)

1
bread and fish oilRutimech manufactures custom alloy for specialist applications and has decided to try and refine their manufacturing process by using inert anode technology instead of carbon anodes.
2
bread and fish oilThrough previous work Rutimech developed an inert anode technology but it required further development and testing to see if it could be used on a larger scale and reduce costs and increase energy efficiency.
3
bread and fish oilThe company undertook this testing in a pilot cell and in a production environment.
4
bread and fish oilBecause this process involved experimental testing, and evaluation and created new knowledge, Rutimech decided that it was eligible as a core R&D activity and could be supported by the R&D Tax Incentive.

Rutimech (Supporting R&D Activity)

1
bread and fish oilHaving already developed the technology to produce the anode, Rutimech realised that the production of the material for the testing in a production run wasn’t in and of itself an R&D activity.
2
bread and fish oilRutimech outsourced this body of work to a specialist manufacturer. However, because it was directly related to the core activity, the manufacture was eligible as a supporting activity and could still receive support from the R&D Tax Incentive.
 
 

References