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This case study exemplifies the application of key legislative requirements for eligible R&D activities as they apply to relevant activities in the biotechnology industry.

Business Scenario

Animal Nutrition Organization Australia (ANOA) is dedicated to providing natural, non-antibiotic solutions to varied animal health and nutrition issues.

In 2012, ANOA decided to take part in an eight-year study to ensure that Australian beef was a high quality meat that was environmentally responsible, safe and nutritious. ANOA created a hypothesis for this program of investigation which stated,

“With knowledge  of  the  intrinsic  factors  regulating  the  metabolism  of  the gastrointestinal  tract,  we  can  identify  mechanisms  for  improving  feed  intake,  enhancing  feed efficiency and reducing the reliance on antibiotic use.”

The first research phase of ANOA’s R&D study involved  identifying  the  intrinsic factors  that regulated feed intake in the cow and developing a suitable, low temperature, high moisture pellet that facilitated the ingestion of the feed by cows.

To achieve  its  technical objectives and overcome  the  related  technical  risks, the ANOA generated new knowledge at the conclusion of each experimental stage and built upon that knowledge at every stage of the remaining project.

After undergoing its first year of experimentation, ANOA claimed four R&D activities for the 2013 fiscal year; two core and two supporting.

ANOA’s Core R&D Activities

The main objective for this core activity was  to determine whether a model for identifying cow preferences based on the chemosensory properties of an ingredient could be designed and developed. This experiment included:

• Identification of substances known to have an impact on feed intake and efficiency.
• Validation of a model for identifying cow preferences based on the chemosensory properties of an ingredient.
• Determination of the statistical sensitivity of the model for identifying the preferences of different ingredients and purification of feed ingredients.
• Determining of optimal feed processing conditions for retaining the intake improvement of an ingredient in a commercially relevant cow feed.

Trials and analysis of data to achieve results that can be reproduced to a satisfactory standard (development and testing of feed intake and efficiency enhancers).

The hypothesis for this ANOA core activity stated that with improved knowledge of the intrinsic factors regulating the metabolism of the gastrointestinal tract, it was possible to identify mechanisms for improving feed intake, enhancing feed efficiency and reducing the reliance on antibiotic use.

Details of this experiment included development of the enhancers based on information gained through the model and testing of the enhancers to ensure efficiency, accuracy and safety.

Commentary

1. Experimental activities whose outcome can not be determined in advance on the basis of current knowledge, information or experience, but can only be known by exercising a systematic progression of work that follows the principles of established science, proceeding from hypothesis to experiment, observation and evaluation, and lead to logical conclusions.
2. Experimental activities that are conducted for the purpose of creating new knowledge.

If the outcome of an activity can be obtained without a hypothesis, then the activity will not be considered R&D.

ANOA’s Supporting R&D Activities

ANOA’s background research included literature search and review, consultations with industry professionals and potential customers, and preliminary equipment and resources review.

The activities conducted in the background research were necessary to support the core activities because they assisted in identifying the key elements of the research project.

Ongoing analysis of customer or user feedback to improve the prototype design (feedback R&D of the feed intake and efficiency enhancers).

This supporting R&D activity included:

• Ongoing analysis and testing to improve the efficiency and safety of the project.
• Ongoing development and modification to interpret the experimental results and draw conclusions that served as starting points for the development of new hypotheses.
• Commercial analysis and functionality review.

These activities were directly related to ANOA’s core R&D activities because the feedback was necessary to evaluate the performance capabilities of the new design in the field and to improve any flaws in the design.

Commentary

Activities that do not form part of the core experimental activities may still be eligible as supporting R&D activities. Supporting R&D activities are directly related to an eligible core R&D activity. They must have been performed for the primary purpose of supporting a qualified R&D activity.

What records and specific documentation did ANOA keep?

To meet the R&D Tax Incentive requirements, ANOA 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.

ANOA saved the following documentation:

• Literature review
• Background research
• Project records and laboratory notebooks
• Photographs / videos of extrusion process
• Testing protocols
• Results or analysis from testing / trial runs
• Progress reports and meeting minutes
• Records of resource allocation / usage logs
• Staff time sheets
• Tax invoices

By having these records on file, ANOA confirmed that it was ‘compliance ready’ — meaning if it was selected for an ATO audit, it could present documentation to show the progression of its R&D activity.

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