Under the R&D Tax Incentive Scheme, R&D activities are defined as either ‘core’ or ‘supporting’ R&D activities. Supporting activities may be claimed, however they must be directly related to the core R&D activity, or done for the dominant purpose of supporting the R&D.
For core activities, claimants will be required to demonstrate and document how their R&D activities involve, amongst other things, experimental activities that follow the scientific progression of work, in an effort to produce new knowledge that cannot be determined from existing knowledge or experience. The application form contains the two sections to help companies identify and demonstrate their core activities:
New knowledge: This refers to the new knowledge (eg new information or facts) to be generated by conducting this project, and could be in the form of technological advancement or development of new or improved materials, products, devices processes or services.
Unknown Outcomes: This refers to the knowledge aforementioned, which must be new to the world and not be available in the public arena on a reasonably accessible basis at the time the activities were conducted. Whether the knowledge is new to the world should be judged from the perspective of a competent professional in the field of R&D. Good examples of this are literature review or the consultation of an industry expert before a project commences.
An important aspect to consider is that all activities claimed under the R&D Tax Incentives program need to be substantiated with contemporaneous records – this includes being able to provide evidence that the purpose of the activities being claimed was for generating new knowledge, particularly where production purposes exist.