May 31st, 2021
AusIndustry have recently circulated a draft of new guidance on the eligilbity of software development activity under the R&D tax incentive.
The guidance does not appear to materially differ from the principles of eligibility in other guidance documents published in recent years.
Whilst the eligibility of software R&D activity was certainly scrutinised, particularly during the period from 2017 to 2019, a misconception occurred by some perceiving that software activities are not eligible under the R&D tax incentive.
This is certainly not the case, and software development activities can indeed be eligible, however claimants must demonstrate how:
- they are generating new knowledge (from a computer software development or science perspective) and not merely applying existing knowledge to their commercial objectives;
- they are resolving unknown outcomes that a competent professional could not have known or determined in advance based on current publicly available knowledge.