In the matter of RACV Sales and Marketing (RACV) Pty Ltd V Innovation Australia, the Administrative Appeals Tribunal (AAT) has upheld the decision of Innovation Australia that the company’s activities were not research and development (R&D) activities as defined in s 73B(1) of the Income Tax Assessment Act (ITAA) 1936.
RACV was registered under s 39J of the Industry Research and Development (IR&D) Act in respect of R&D activities in each of the 8 income years 1998-1998 to 2005-2006 inclusive.
In respect of each of those years, RACV has claimed that it is entitled to the deduction under s 73B of the ITAA on the basis that it has incurred the requisite level of expenditure in respect of R&D activities carried on by it or on its behalf.
The R&D activities conducted by RACV involved crash testing methodology carried out as part of the Australian New Car Assessment Program (ANCAP).
Innovation Australia decided in October 2007 that RACV’s activities did not satisfy the eligibility criteria under s 73B(1) of the ITAA as the activities did not involve innovation or high levels of technical risk. It also decided to issue a certificate under s 39L of the IR&D Act to reflect that decision.
At the request of RACV, Innovation Australia reviewed its earlier decision, however they confirmed their earlier decision commenting that the activities “were not systematic, investigative and experimental”
The AAT affirmed the decision of Innovation Australia, confirming that it was not satisfied that the applicant’s activities are R&D activities as defined in s 73B(1) of the IR&D Act.
The matter was remitted to Innovation Australia to give the Commissioner of Taxation a certificate to that effect under s 39L of the IR&D Act 1986.