In the case of Docklands Science Pty Ltd and Innovation Australia [2015] AATA 973, the Administrative Appeals Tribunal (AAT) has determined that activities conducted by the taxpayer were not R&D activities as there was insufficient documentation to support the claim.
Background
Decision
The AAT upheld AusIndustry’s finding by concluding that the registered activities were not core R&D activities for the purpose of section 355-25(1) of the Income Tax Assessment Act 1997. Senior Member Egon Fice of the AAT, agreed that documentation is necessary to substantiate the R&D activities claimed by an applicant. He noted [63], ‘Such documents are required for the purpose of evidencing experimental activities whose outcome cannot be known or determined in advance but can only be determined by applying a systematic progression of work based on established science; and which proceeds from hypothesis to experiment, observation and evaluation and leads to logical conclusions.’
Applicants for the R&D Tax Incentive must provide detailed documentation substantiating the process for each conducted activity. This case highlights the importance of:
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