Rix’s Creek Pty Limited; Bloomfield Collieries Pty Limited v Innovation Australia [2017] AATA 645

May 26th, 2017

Introduction

The case Rix’s Creek Pty Limited; Bloomfield Collieries Pty Limited and Innovation Australia [2017] AATA 645, refers to two related mining companies which registered and claimed for the R&D Tax Concession for the years 2008 to 2012. After reviews were conducted on the claimed activities, Innovation and Science Australia found that the majority of the activities were not eligible for the R&D assistance. The respective companies opposed this decision and applied to the Administrative Appeals Tribunal for an independent review.

Background

The following case refers to six projects, across three different categories and at two different mine sites. All the claimed activities took place in the context of two working mines; Rix’s Creek mine in Singleton and Bloomfield mine in East Maitland.

Projects associated to Rix’s Creek mine

  • Explosive project: Development of a new process for producing explosives using recycled refined oil from Rix’s Creek machinery.
  • Excavator Project: New design and development of an improved bucket for the EX 3600 excavator in order to increase the payload achieve per pass.
  • Excavator Project: Design and development of new processes and devices to increase load haul cycle efficiency in removing overburden at the Rix’s Creek open cut mine.

Projects associated to Bloomfield mine

  • DMS project: Trial, test, modify and redesigning a prototype device for measuring the density of a liquid used to separate coal from ground waste material. The activities involved the testing of the device in the production environment of coal handling and preparation plants.
  • Excavator Project: Development of new methods for removing overburden to improve mine life. Improving operation efficiency, design and development of new and improved processes and devices for removing ROM product and overburden materials to improve mine life and operational efficiency.
  • Explosives Project: Design and Development of a new process for replacing diesel fuel in the manufacture of bulk explosives incorporating recycled refined oil from mine machinery.

The overall concern raised by Innovation and Science Australia was that the companies were trying to characterise ordinary mining processes as R&D activities.

Decision

Dense Media Sampling (DMS) project

The Tribunal decision resulted in concluding that the activities were ‘only tinkering with the overall design’. The project was considered grossly excessive in extent and time, highly repetitive, consisting of an excessive level of testing and disproportionate to the level of risk it attempts to mitigate. While it was claimed that periodic measurements were taken, there were no records found about the performance of the ‘important variables’.

It was concluded by the Tribunal that the conducted and documented activities were not undertaken for the purpose of generating new knowledge and recognised purely as activities conducted during the ordinary business of mining. As the R&D tax incentive is not intended for ordinary business operations and cannot be claimed for this purpose the DMS project activities were concluded as not R&D and therefore ineligible for the incentive.

Explosives Projects

It was concluded that the technical approach taken was relatively rudimentary and unsophisticated. The observation and measurements for each stage of the trials involved little, if any, more data than that which would be expected for normal blasting operations. Additionally, the trials lacked in outcome and the ability to convert informative data into information. While it is not a statutory requirement to have this evidence, it would have greatly assisted in establishing whether the activities were conducted in a systematic, investigative and experimental manner.

Subsequently the Tribunal concluded that the activities lacked the required purpose of acquiring new knowledge or creating new or improved materials, products, devices, processes or services. The activities were considered as having a determined outcome and were incapable of proving to generate new knowledge. The activities did not uphold the R&D requirements and failed to be considered as R&D activities.

Excavator Projects

The project used a one variable at a time (OVAT) approach which proves to only be effective if all variables are controlled, however this was not the case. The OVAT approach failed to establish the true relationships of the various affecting factors. If an activity is conducted in a production environment and it is not designed well enough to test the claimed hypothesis, it may be found ineligible.

The Tribunal concluded that the approach used for the following project was incapable of producing meaningful results and therefore the activities were not systematic, investigative or experimental. As a result the excavator projects were also ineligible for the R&D Tax Incentive.

Conclusion

The conducted activities failed to be of an adequate systematic, experimental or investigative nature and subsequently unable to demonstrate the generation of sufficient amounts of new knowledge. The projects showed to be too much of a routine business activity and failed to involve significant signs of innovation and high leveled technical risk.

The outcome of the Rix’s Creek Pty Limited; Bloomfield Collieries Pty Limited v Innovation Australia [2017] AATA 645 case was concluded as both companies being ineligible to receive the R&D Tax Incentive.

Categories

Archives

Posted on Google Google
Daniel McGregor  profile picture
Daniel McGregor
11. August, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
I have been using Swanson Reed for my clients for more than a decade. Having a specialist firm that can provide practical and commercial advice that produces real outcomes is very important and we have received great feedback from our clients. Highly recommended.
Posted on Google Google
John  profile picture
John
15. June, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
Damian and the rest of the team at Swanson Reed have been supporting us for several years. We always appreciate their insights, expertise, and efforts.
Posted on Google Google
Rueben Rajasingam  profile picture
Rueben Rajasingam
6. June, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
Experienced responsive Team. They have been a great help to me and my company navigate the R&D tax claim process and have provided invaluable advice.
Posted on Google Google
Enrique Esquivel  profile picture
Enrique Esquivel
6. June, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
Damian and the team at Swanson Reed have been extremely helpfully and professional during all of our consultations. Highly recommended.
Posted on Google Google
Jess at Y&C  profile picture
Jess at Y&C
3. June, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
Posted on Google Google
Anatole Kononewsky  profile picture
Anatole Kononewsky
2. June, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
The Swanson Reed team have provided our company with exceptional professional advice and assistance for all of our R&D claims for many years - have always achieved great results with excellent value for their services.
Posted on Google Google
Payam Toloo  profile picture
Payam Toloo
2. June, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
Damian Smyth and his team are very helpful, supportive and experts in their field of R&D Tax claims. I'm always happy with the work they do and been a customer of their for over 5 years.
Posted on Google Google
Melissa Doddy  profile picture
Melissa Doddy
31. May, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
The Team at Swanson Reed are very experienced R&D Tax Advisors and gave us ongoing support with all of our R&D Claims, the consultants ensured we were always working with current legislative guidelines, gave us assistance with compiling technical and government documentation and went out their way to ensure they were with us for the entire process from beginning to end. Highly recommended to anyone who needs assistance with working through what can at times be a daunting process.
Posted on Google Google
Gary Watson  profile picture
Gary Watson
31. May, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
We can highly recommend Swanson and Reed as an R & D accountant. We have worked with them for several years now as they make our R & D claim so easy and communicate quickly with both us and our accountant.
Posted on Google Google
Rob van den Bergh  profile picture
Rob van den Bergh
31. May, 2022
Google star 1Google star 2Google star 3Google star 4Google star 5Trustindex verifies that the original source of the review is Google.
Always professional.