Freeman Home Builders (Freeman) is a custom home construction company involved in designing, constructing and managing home builds from conception to delivery.
In 2012, Freeman identified that the inefficiencies that occurred during the building process were a result of poor industry practices, which were manual, resource-intensive and poorly organized.
Freeman saw a need for a new, all-encompassing software that could handle all aspects of its business instead of the existing market technology that focused strictly on design. Freeman formulated a hypothesis for its new R&D project:
“A management system can be designed and developed to manage all aspects of a building project by integrating the functions of design, customer relationship management (CRM) and accounting software.”
Freeman projected its R&D project would be ongoing for four years. The company believed its new management software (FMS) could be achieved by implementing four key R&D activities.
This core activity focused on whether a management system could be designed and developed to manage all aspects of a building project by integrating the functions of design, CRM and accounting software.
After cycles of coding, testing and re-coding, Freeman was able to prove the theoretical feasibility of developing FMS.Trials and analysis of data to achieve results that can be reproduced to a satisfactory standard and to test the hypothesis (prototype development and testing of FMS).
The hypothesis for this core activity was to prove that theoretical conclusions from the design phase could be realised through development and testing of FMS, and conclude that a management system could be designed and developed to manage all aspects of a building project.
If the outcome of an activity can be obtained without a hypothesis, then the activity will not be considered R&D.
Freeman engaged in background research for three years which included the following activities:
These specific background research activities were directly related to Freeman’s core R&D activities because they assisted in identifying the key elements of the research project, therefore qualifying as supporting R&D activities.Ongoing analysis of customer or user feedback to improve the prototype design (feedback R&D of FMS).
This supporting R&D work included activities such as ongoing analysis and testing and continuous development and modification to interpret the experimental results.
These activities were necessary to evaluate the performance capabilities of the new design in the field and to improve any flaws in the design, thereby directly relating it to the core activities of the project.
To meet the R&D Tax Incentive requirements, Freeman had to save documents that outlined what it did in its core R&D activities, including experimental activities and documents to prove that the work took place in a systematic manner. Freeman saved the following documentation:
This is an excellent example of how to be ‘compliance ready’ — meaning if you were selected for an audit by the ATO, you could present documentation to show the progression of your R&D activity.