HZXD and Innovation Australia [2010] AATA 879

March 7th, 2014

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.

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