A recent case heard in the AAT has affirmed a previous decision by Innovation and Science Australia (AusIndustry) finding that Activities registered under the R&D Tax Incentive were not in accordance with the legislative requirements.
The case: Ultimate Vision Inventions Pty Ltd and Innovation and Science Australia (Taxation)  AATA 1633 refers to a company that registered R&D activities for the FY14 and FY15 periods.
The project related to the development of an integrated health and fitness program and cloud-based decision support systems. The project’s core activities in the relevant period were as follows:
An AusIndustry examination of the R&D Registrations in the relevant periods found that the activities were not eligible, due to the R&D entity having not had sufficient evidence of the process of conducting the registered activities, as well as the need to conduct experiments.
The AAT upheld AusIndustry’s finding that the activities were not eligible.
The Administrative Appeals Tribunal member appeared to find particular deficiencies with the R&D Registration in respect of:
o Recording of vague results;
o Collecting only a minute sample of data;
o No meaningful analysis of results;
Learnings from Decision
The decision highlights the importance of:
o The knowledge generating purpose of conducting the activity;
o Why the outcome of the activity cannot be determined in advance;
o The systematic process of conducting the activity;