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North Broken Hill Ltd v Industry R&D Board [1993] AATA 254

April 4th, 2014

The AAT has upheld the IR&D Board’s decision that North Broken Hill’s activities in designing and implementing the Product Tracking System were not research and development activities for the purposes of section 73B of the Assessment Act..

Facts
The Commissioner of Taxation requested the IR&D Board to give him a certificate stating whether a project, carried on by North Broken Hill and known as the “Product Tracking System” project, was an R&D activity.

The IR&D Board had one of its officers inspect the product tracking system in operation at North Broken Hill’s paper mill in Burnie; he expressed the opinion that it came within the definition of R&D and recommended issue of the certificate. It is not clear whether he was referring to the IR&D Act or the ITAA 1936. In spite of his recommendation, the Tax Concession Committee of IR&D Board, decided that the activity related essentially to the development of computer software and, as the requirements of section 73B(2A) of the ITAA 36 were not met, was not within the definition of “R&D activities” in section 73B(1).

North Broken Hill applied to the AAT for a review of the IR&D Board’s decision.

Decision
North Broken Hill’s activities in designing and implementing the Product Tracking System were not R&D activities.

It is probable that the designing and development of the software was an activity involving innovation. However, the software was developed otherwise than for the purpose of sale, rent, licence, hire or lease as so is not considered an R&D activity.

The use of existing technology to operate what is essentially an information system of the same type as that installed in a number of other industrial environments is not innovative simply because it is installed in a new environment.

Click here to view the North Broken Hill v Industry Research and Development Board case.