WHAT ARE THE ELIGIBILITY CRITERIA?
To be eligible for the R&D Tax Incentive you must:
- be a company that is liable to pay income tax in Australia
- conduct at least one activity that meets the definition of a core R&D activity
- have eligible R&D expenditure greater than $20,000
Eligible R&D activities are ‘core R&D activities’ and ‘supporting R&D activities’.
To register, you must have at least one core R&D activity. Supporting R&D activities are optional.
THE BELOW DEFINITIONS ARE EXTRACTS FROM SECTION 355 OF THE INCOME TAX ASSESSMENT ACT 1997.
“What are core R&D activities
Under section 355-25 of the Income Tax Assessment Act 1997:”
Core R&D activities are experimental activities:
- Whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that: is based on principles of established science; and
- Proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and
- That are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).
- Some types of activities are excluded under section 355-25(2) of the legislation from being core R&D activities. Some of these excluded activities may be eligible for the R&D Tax Incentive as supporting R&D activities if they meet all of the requirements.
SUPPORTING R&D ACTIVITIES ARE ACTIVITIES DIRECTLY RELATED TO CORE R&D ACTIVITIES. HOWEVER, IF AN ACTIVITY:
- Is an activity referred to in subsection 355-25(2); or
- Produces goods or services; or
- Is directly related to producing goods or services;
the activity is a supporting R&D activity only if it is undertaken for the dominant purpose of supporting *core R&D activities.
EXCLUDED ACTIVITIES
Under section 355-25 of the Income Tax Assessment Act 1997 none of the following activities are core R&D activities:
- Market research, market testing or market development, or sales promotion (including consumer surveys);
- Prospecting, exploring or drilling for minerals or * petroleum for the purposes of one or more of the following:
- Discovering deposits.
- Determining more precisely the location of deposits;
- Determining the size or quality of deposits;
- Management studies or efficiency surveys;
- Research in social sciences, arts or humanities;
- An affiliate of the developer, or an entity of which the developer is an affiliate.
- Commercial, legal and administrative aspects of patenting, licensing or other activities;
- Activities associated with complying with statutory requirements or standards, including one or more of the following:
- Maintaining national standards.
- Calibrating secondary standards.
- Routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things;
- Any activity related to the reproduction of a commercial product or process:
- By a physical examination of an existing system
- From plans, blueprints, detailed specifications or publicly available information.
- Developing, modifying or customizing computer software for the dominant purpose of use by any of the following entities for their internal administration (including the internal administration of their business functions):
- The entity (the developer) for which the software is developed, modified or customized.
- An entity connected with the developer.
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