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Disclaimer

The information provided in this guidance is general in nature and is intended to help you to self-assess the eligibility of your R&D activities. If the Department of Industry, Science and Resources (the department) undertakes a formal review, we will assess your activities against the legislative criteria set out in sections 355-25 and 355-30 of the Income Tax Assessment Act 1997.

Common risk areas

When self-assessing your eligibility for the R&DTI, there are some common risk areas to be aware of if you are conducting biotechnology and medical sciences-related activities.

Planning or exploratory R&D activities are usually not eligible under the R&DTI program. While these activities help identify research direction, they do not generally involve technical uncertainty that can only be resolved through experimentation. They also do not involve developing a hypothesis that you can test through experiments. These activities may include:

  • background research to help you decide whether to undertake the R&D activities
  • exploring and comparing technologies to identify potential products to develop
  • analysing existing datasets to identify possible candidates for drug development.
These activities will also not meet the requirements for supporting R&D activities as they are not directly related to a core R&D activity.

Routine testing does not meet the requirements of a core R&D activity because:

  • it does not aim to resolve a technical uncertainty
  • it does not involve conducting hypothesis-led experiments.

Rather, routine testing is used to confirm an expected outcome based on established knowledge or information.

Examples of routine testing include:

  • microbiological assays to confirm the presence of a microorganism
  • product characterisation
  • quality testing
  • diagnostic imaging to assess health outcomes.

Where testing is not undertaken as part of a core R&D activity, you can assess whether it meets the requirements of a supporting R&D activity.

When you apply for the R&DTI, you may group different activities into a single R&D activity. However, you should consider whether this helps to accurately describe your activities and how they meet the program’s eligibility requirements. For advice on how and when to do this, refer to the department’s application guidance: How should companies group R&D activities?

Biotechnology and medical sciences activity exclusions

Certain activities are not eligible to be registered as core R&D activities under the R&DTI program. Find a list and detailed explanation of excluded activities on the Excluded R&D activities under the R&DTI page.

The exclusions that commonly apply to the biotechnology and medical sciences sector are:

  • commercial, legal and administrative aspects of patenting, licensing or other activities
  • activities associated with complying with statutory requirements or standards
  • activities related to the reproduction of a commercial product or process.

Activities excluded as core R&D activities may still qualify as supporting R&D activities.

Clinical trials determination

Determinations are binding advice about how the department interprets and applies the law when administering the R&DTI. The Industry Research and Development (Clinical Trials) Determination 2022 applies to certain clinical trial activities for therapeutic goods that are yet to be approved in Australia.

This determination could simplify your application for the R&DTI.

If your activities meet the requirements of section 5, you may only need to show that your activities are covered by the determination. You do not need to explain how the activities meet all the core R&D activity requirements.

The department provides guidance on how you can use this determination when:

Record keeping for biotechnology and medical sciences activities

You are required to keep records to demonstrate the eligibility of your activities and expenditure for the R&DTI. The Record keeping for the R&DTI page provides more information about record keeping requirements and recommended practices.

Examples

The following hypothetical examples are designed to help you better understand the eligibility requirements of the R&DTI and identify which of your activities may qualify for the program.

These examples provide general guidance only and do not replace the legislative definitions.

Example 1: AI-based screening of biomarkers

This example explains when background research does not meet the requirements for core or supporting R&D activities. It shows how the outcome of the activity could be determined using analysis of existing knowledge, rather than through experimentation. The example also shows how this background research is not directly related to any specified core R&D activities.

Scenario

A company is conducting research into chronic inflammatory diseases. The company uses artificial intelligence (AI) and machine learning models to analyse existing biomedical data to identify statistical associations, patterns, and biomarkers that may be linked to inflammatory diseases.

The activities

The company applies AI models to analyse large, existing biological datasets to identify statistical correlations between genes, proteins and disease outcomes. The work involves:

  • sourcing publicly available datasets such as gene expression and proteomics data
  • applying established machine learning techniques to detect patterns and associations between biomarkers and disease indicators
  • producing a ranked list of biomarkers associated with different chronic inflammatory disease presentations.

The company reviews the biomarker list and the inflammatory disease presentations to assess how well they are already known in scientific literature. It then identifies which disease subtypes are biologically plausible targets to develop new treatments.

Outcome could be known or determined in advance

This is not a core R&D activity because its outcome could have been determined in advance based on current knowledge, information or experience.

In this example, a competent professional could have determined (without conducting a hypothesis-led experiment) that analysing existing biological datasets would identify patterns, biomarkers and different disease presentations associated with chronic inflammatory disease.

Not directly related to a core R&D activity

This is not a supporting R&D activity because it is not directly related to any existing or planned core R&D activity. The result of the activity (a list of disease subtypes for potential further study) was not directly used to refine a hypothesis or design experiments for any subsequent activities.

Example 2: supporting activities for a clinical trial

This example explains how excluded activities in the lead-up to a clinical trial could be eligible as supporting R&D activities. These activities are directly related to, and conducted for, the dominant purpose of supporting a planned core R&D activity.

Scenario

A company is investigating a new candidate to treat a specific chronic inflammatory disease. They have completed pre-clinical testing (including animal studies) and a phase I clinical trial. Based on the results of earlier studies, the company plans to conduct a phase IIa trial.

The activities

The company engages a contract research organisation (CRO) to manage the clinical trial on its behalf. The CRO identifies suitable hospitals where the trial could take place. It then prepares and submits the trial protocol and investigator brochure (IB) to the Human Research Ethics Committee (HREC) for approval. The CRO also registers the trial on the Australian and New Zealand Clinical Trials Registry (ANZCTR) before enrolling participants.

After receiving HREC approval, the CRO submits a Clinical Trial Notification (CTN) to the Therapeutic Goods Administration (TGA) and seeks site approval from each participating trial site. Once the TGA has acknowledged the CTN and all trial sites have given permission, the CRO starts the trial.

At the end of the income year, the company assesses which activities to register for the R&DTI.

As the phase IIa trial has a CTN, the company decides to rely on the Industry Research and Development (Clinical Trials) Determination 2022.

This demonstrates that the company plans to conduct a core R&D activity. It now only needs to assess which activities are supporting R&D activities for the phase IIa trial.

Directly related to a core R&D activity

Each of the following can be supporting R&D activities because they are directly related to, and conducted for the dominant purpose of supporting, the phase IIa trial:

  • preparing and lodging the trial documents for ethics approval
  • applying to register the trial on the ANZCTR
  • applying to the TGA for the trial under the CTN scheme.

These activities are directly related to the phase IIa trial because they need to be performed before the trial can begin.

The activities for ethics approval and TGA notification are excluded from being core R&D activities because they involve complying with statutory requirements. However, they are eligible as supporting R&D activities because they are conducted to obtain approval to undertake the core R&D activity.

Example 3: regulatory requirement for additional clinical evidence to register a medical device outside Australia

This example explains when a clinical trial undertaken to obtain additional clinical evidence does not meet the requirements for a core R&D activity. This is because the outcome is already known through previous clinical studies. The activity also does not meet the requirements of supporting R&D activities as it is not directly related to a core R&D activity.

Scenario

A company has completed a pre-market pilot study and pivotal stage clinical trial in Australia for its new medical diagnostic device. After submitting all the required performance evidence, the company registers the device in the Australian Register of Therapeutic Goods (ARTG), enabling commercial supply in Australia.

The company then applies for approval from the Food and Drug Administration (FDA) to market the device in the United States of America. The application is supported by non-clinical performance testing results and data from Australian clinical trials. However, the FDA requests additional clinical data to assess whether the device is substantially equivalent to an approved comparator device.

The activity

The company first obtains independent ethics committee approval, meets Good Clinical Practice requirements and consults with the FDA on the study design. It then conducts an equivalence or non-inferiority clinical investigation in Australia.

The study compares the safety and effectiveness of the new device with an established, legally marketed comparator device. Patients are recruited, enrolled and allocated to study groups using either the new device or the comparator device.

Outcome could be known or determined in advance

This is not a core R&D activity because the outcome of the activity is already known or can be determined in advance based on current knowledge, information and experience.

The outcome (the safety and effectiveness of the new device) has already been determined through the completed pre-market pilot study and pivotal stage clinical trial.

Excluded core R&D activity

This activity is excluded from being a core R&D activity because the study involves complying with statutory requirements or standards. The company conducted the study to comply with an FDA request for additional clinical data to support regulatory evaluation of the device.

Not directly related to a core R&D activity

This is not a supporting R&D activity because it is not directly related to a core R&D activity. It does not support the systematic progression of work for the pre-market pilot study or the pivotal stage clinical trial that determined the device’s performance. There are also no other planned core R&D activities that are directly related to this activity.

As the new medical device has been included in the ARTG and is commercially available in Australia, the activity is directly related to producing goods. To be a supporting R&D activity, the study must be undertaken for the dominant purpose of supporting a core R&D activity. In this case, the activity is not a supporting activity because it is conducted for the dominant purpose of meeting FDA requirements.