On 6 February 2020, the AAT decided that certain of the taxpayer’s activities were not ‘core’ R&D activates, but rather normal prospecting.
See below for a summary of the case.
A coal mining company has failed to convince the AAT that certain activities designed to make extracting coal from particular deposits commercially viable were “core activities” for R&D purposes.
The taxpayer wanted to develop new mining and beneficiation processes that would enable it to extract and process coal in a commercially viable way in an area of central Queensland known as FCCM.
It therefore applied to register various activities as “core” R&D activities for the 2011-12 income year (as part of a 3-year project), including:
- a 2D seismic survey and a SkyTEM electromagnetic survey;
- drilling to validate the survey results and provide samples for independent analysis; and
- the analysis.
Innovation and Science Australia, however, decided that the activities were not “core activities”, a decision upheld by the AAT.
The activities were “generic exploration activities” which a company with a mining tenement would undertake in order to ascertain the location, quality and size of the coal resources. Accordingly, they came within the exemption from “core activities” in s 355-25(2)(b), namely for prospecting or drilling for minerals for the purposes of discovering deposits, determining more precisely the location of deposits and/or determining the size or quality of deposits.
(Coal of Queensland Pty Ltd v Innovation and Science Australia  AATA 126, AAT, McCabe DP and Poljak SM, 30 January 2020.)
[LTN 24, 7/2/20]