In the matter of HZXD and Innovation Australia, the Administrative Appeals Tribunal (AAT) reviewed the decision of Innovation Australia that a biometric project developed by HZXD did not satisfy the definition of R&D as defined in s. 73B (1) of the Income Tax Assessment (ITA) Act 1936.
The applicant, a company, as part of their income tax return had made a claim under the R&D Tax concession for their project entitled “Development of Face Recognition Car Parking ASP System”. The claims are made for the 2003-2004, 2004-2005 and 2005-2006 years of income.
The aim of the applicant’s R&D plan, dated 1 July 2007, was the development of a replacement for the current car parking methodology for identifying customers wishing to access car parks.
Innovation Australia rejected their project as eligible under the R&D Tax concession as it did not satisfy the definition of R&D activities.
The project was held not to demonstrate the characteristics R&D as required by the ITAA 1936.
In looking at the project as a whole, the project consisted of the adaptation of interfaces to connect pre-existing identification systems to replace card or token systems used for carpark management.
There were no contemporaneous records of what work was undertaken, and when it was conducted including the results of any claimed trial and error processes, and since the claimed R&D has not resulted in any identifiable product, the Tribunal is satisfied that it is impossible to assess what was done constituted systematic, innovative or experimental work or involved technical risk.
The descriptions of the work actually carried out as R&D needed to be more defined to demonstrate characteristics of R&D as required by the ITAA 1936.