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Eligible supporting R&D activities

To be eligible for the R&DTI, supporting R&D activities must be directly related to core R&D activities.

Some activities need to meet an additional requirement to qualify as supporting R&D activities. If an activity (other than one related to gambling or tobacco):

then it must be conducted for the dominant purpose of supporting core R&D activities.

Activities related to tobacco or gambling can only be eligible as supporting R&D activities if they are conducted for the sole purpose of harm minimisation.

If you conduct, or plan to conduct, at least one core R&D activity, you can then self-assess whether any of your other activities qualify as supporting R&D activities. Several supporting R&D activities may be directly related to a single core R&D activity.

The legislative definition of supporting R&D activities is provided in section 355.30 of the Income Tax Assessment Act 1997.

Directly related activities

You need to identify the core R&D activity to which your supporting R&D activity is directly related.

You also need to identify the relationship of the activity with the elements in your systematic progression of work. The Department of Industry, Science and Resources (the department) expects you to identify and record what that relationship is when you conduct your activities and to explain what that relationship is when you apply for the program.

Whether your supporting R&D activity is directly related to a core R&D activity will depend on your circumstances. We expect you to analyse your specific circumstances and keep records to support your claim.

Activities that could be directly related to a core R&D activity include:

  • a literature review to refine your hypothesis before you conduct your experiment
  • you clean and maintain the equipment you use during experiments
  • you decommission and dismantle equipment you used in experiments after you have reached logical conclusions.

R&D activities in different years

You can conduct supporting R&D activities before, during or after your core R&D activity.

When you plan your R&D, you may schedule activities over different years.

You may conduct your supporting R&D activity in a different year to your core R&D activity. If you do this, you will need to specify your core R&D activity when you apply to register your supporting R&D activity.

We recognise that R&D is uncertain and your plan may change. Although you may describe intended core R&D activities in your registration, you may not conduct those activities. You should explain these changes to your planned core R&D activities to us when you apply to register.

You plan to conduct R&D at the same time as you conduct your other business activities. Your plan includes initial designs for the experiments and a schedule for the R&D activities over 3 years.

  • In the first year, you conduct an extensive literature review and consult with experts in the field. You use this information to plan your systematic progression of work.
  • In year 2, you start your core R&D activities and document the experiments that you conduct.
  • Year 3, you continue your experiments in a pilot plant and observe results from your experiments. In year 3, you evaluate results from your experiments.
  • Year 4 is where you plan to apply the new knowledge you generate to move to full-scale production if your hypothesis is supported. You may need to undertake further activities to apply the results to production. You will need to assess whether your later activities meet the requirements for eligible R&D activities. You may not know this until after you evaluate the results of your experiments.

Your literature review and research may be registered for year 1 as a supporting R&D activity if you can be specific about the core R&D activities you intend to conduct in years 2 and 3 which these activities will be directly related to. We will expect to see your records that show in year 1 you planned to conduct core R&D activities in years 2 and 3. Your records will need to show that you meet the requirements as an R&D entity, and you plan to conduct at least one core R&D activity.

What activities are not supporting R&D activities?

Activities that are not directly related to at least one of your core R&D activities cannot be supporting R&D activities. Your activities are likely directly related to your core R&D activities if they support you to conduct your systematic progression of work.

Activities that will not usually have a direct relationship to a core R&D activity include:

  • a literature review or internet search that you conduct to identify a market niche for a new product
  • you clean and maintain equipment that you do not use for an experiment
  • you decommission and dismantle equipment that you did not use to conduct experiments.

Dominant purpose

Dominant purpose means your prevailing or most influential purpose. Your main purpose of conducting your activities must be to support a core R&D activity.

Supporting R&D activities must be directly related to a core R&D activity. Some directly related activities must also be conducted for the dominant purpose of supporting your core R&D activities to be eligible as supporting R&D activities. These include activities that:

  • are excluded from being core R&D activities
  • produce goods and services
  • are directly related to producing goods or services.

In any of these circumstances, you need to assess whether you conduct each of these activities for the dominant purpose of supporting a core R&D activity.

To determine your dominant purpose to conduct an activity, you need to consider all your purposes. You then need to consider the strength of each purpose and how important it is compared to your other purposes.

You need to consider:

  • how and when you conduct your activity or establish the need to conduct your activity. This will usually be when you plan or conduct your core R&D activity
  • what other purposes you have to conduct your activity and whether one of the other purposes is more influential
  • how you conduct your activity for the dominant purpose of supporting a core R&D activity. Ask what your activity involves, and why you need it to conduct an element of your systematic progression of work for your core R&D activity
  • whether your activity goes beyond activities you would have conducted if you did not conduct your core R&D activities.

Activities that are likely to have the dominant purpose of supporting a core R&D activity include activities that:

  • have no purpose other than to assist or facilitate a core R&D activity
  • support core R&D activities and where the commercial benefit is insignificant
  • produce items that you consume, or you expect to consume in your experiment
  • create a component to use in a core R&D activity where it serves no other purpose. For example, a part of the experimental apparatus.

Activities that are unlikely to have the dominant purpose of supporting a core R&D activity include those that:

  • produce a good or service that you do not use to conduct an experiment
  • you would undertake if you did not conduct R&D.

Activities that produce goods and services

For your supporting R&D activities that produce or are directly related to producing goods, you must be able to show that you conduct them for the dominant purpose of supporting a core R&D activity. This is regardless of the scale of manufacture or the end user of the goods.

Also, you must be able to show that you undertake your supporting R&D activities that produce or are directly related to producing services for the dominant purpose of supporting a core R&D activity. This is regardless of the terms of the services. This includes services your business provides to itself or to another entity. It also includes services another entity provides to your business.

Whether you conduct an activity for the dominant purpose of supporting a core R&D activity will depend on your specific circumstances. We expect you to analyse and explain your circumstances and keep records to support your claim.

Further information