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Industry Research & Development Board v Unisys Information Services Australia Pty Ltd [1997] FCA 777

In the case of Industry Research & Development Board v Unisys Information Services Australia, the Commissioner ruled in favour of the Administrative Appeals Tribunal (AAT), finding that there was no intention to exclude the de minimis principle in the interpretation of sections 705-35 and 104-626 of the Income Tax Assessment Act 1997 (ITAA 1997).

Background

• The decision of the AAT was that Unisys is entitled to a favourable certificate under s39L of the Industry Research & Development Act 86.
• The effect of the certificate is that work undertaken during the income years ended 31 December 1990 and 31 December 1991 in connection with the development of certain computer software constitutes “research and development activities” within the meaning of s73B(1) of the Tax Act 1901.
• The Industry Research & Development Board is appealing decision of the AAT.
• The issue before the Tribunal was whether work undertaken by the respondent in the development of the computer software satisfied the requirements of s73B(1) of the Tax Act 1901 providing that research and development activities must be involving innovation or technical risk

Decision

The appeal will be dismissed with costs due to:

• The judge agreed with the AAT’s finding that the activities in question involved innovation and technical risk.
• The condition of innovation or technical risk was not de minimis, therefore the conditions were satisfied by the presence of innovation or technical risk of whatever degree, not necessarily of any particular degree.
• One activity that constitutes as research and development may be considerably more innovative and possess more risk than another, however this does not exclude other activities from satisfying the conditions of the statutory language.

R&D activities don’t have to be highly innovative and involve a significant degree of technical risk to be eligible to claim. Activities that your business can claim under the R&D tax incentive do need to contain a component of these two elements, however in the example of this case, the activities may be “de minimis” – a latin term for “minimalist approach”.

Re Industry Research & Development Board v Unisys Information Services Australia Pty Ltd (formerly Synercom Australia Pty Ltd) [1997] FCA 777 (19 August 1997).

Click here to view the Industry Research & Development Board v Unisys Information Services Australia Pty Ltd (1997) case.