NaughtsnCrosses sought a review by the Administrative Appeals Tribunal (AAT) of a decision made by the IR&D Board and affirmed on internal review by the commissioner of taxation, which deemed activities claimed as R&D by NaughtsnCross as ineligible for the R&D tax incentive.
NaughtsnCrosses (called Absoft at the time of the events in the proceedings), claimed that it satisfied the criteria which entitled them to claim the R&D tax concessions for expenditure in the 2002/03 and 2003/04 income years for their “Spyderman Project”.
The project involved embedding heat resistant radio frequency identification (RFID) tags into moulds, installing RFID readers to read the tags and collecting information about the moulds in the course of a manufacturing process.
The applicant lodged an application for registration of its R&D activities in connection with the Spyderman Project in February 2004, and was lodged in March 2005. In January 2006, the Commissioner of Taxation requested the IR&D Board assess whether NaughtsnCrosses activities qualified as R&D activities within the definition in s 73B(1) of the Income Tax Assessment (ITA) Act.
Innovation Australia, in conjunction with the Commissioner of Taxation, determined that the activities claimed in connection with the Spyderman Project did not satisfy the statutory criteria.
The AAT affirmed the IR&D Board’s decision under review not to entitle NaughtsnCrosses to claim the tax concession. Deputy President Hack stated that “the evidence of experimentation and testing is vague and imprecise” and found that the activities under review did not meet the specified guidelines of systematic, investigative and experimental.