Carter Marine Group (CMG) specialises in marine infrastructure projects. In 2013, the company was approached by a client to create a permanent wharf in a high traffic import and export area.
CMG conducted R&D work to fulfill its client’s request with the main business objective being the design and development of a permanent wharf to assist in the importing and exporting of products in the oil and gas industry.
First and foremost, CMG needed to determine the eligibility of its proposed R&D activities in order to know if it qualified for the R&D Tax Incentive. Once it identified the specific activities that qualified as R&D, it needed to assess whether each activity was a core or supporting R&D activity.
The hypothesis for CMG’s core activity was that it could design a permanent wharf to support imports/exports of the oil and gas industry.
After conducting theoretical design experiments, CMG concluded that such a design was feasible, but needed to be prototyped and fully tested to prove the hypothesis.
Trials and analysis of data to achieve results that can be reproduced to a satisfactory standard (prototype development and testing of permanent wharf).
CMG developed and tested the wharf design to prove that it could be permanently installed to help the organisation achieve its project objectives.
CMG concluded that the theoretical conclusions from the design phase could be realised through prototype development and related tests. CMG stated that the new knowledge generated would be used for further iterations of design and development and further field testing.
If the outcome of an activity can be obtained without a hypothesis, then the activity will not be considered R&D.
Background research to evaluate current knowledge gaps and determine feasibility (background research for permanent wharf).
CMG conducted the following activities:
The activities conducted during 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 permanent wharf). This supporting R&D activity included:
These activities were directly related to CMG’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.
To meet the R&D Tax Incentive requirements, CMG 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.
CMG saved the following documentation:
By having these records on file, CMG confirmed that it was ‘compliance ready’ — meaning if it was audited by the ATO, it could present documentation to show the progression of its R&D work, ultimately proving its R&D eligibility.