The AAT has held that a company’s activities were not research and development (R&D) activities as those activities are defined in s 73B(1) of ITAA 1936.
RACV Sales and Marketing Pty Ltd (RACV Sales) was registered under s 39J of the Industry Research and Development Act 1986 (IRD Act) in respect of R&D activities in each of the 8 years of income in issue being 1998-1999 to 2005-2006 inclusive. In respect of each of those years, RACV Sales has claimed that it is entitled to the deduction under s 73B 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 AAT said the R&D conducted by RACV Sales in those years were generally described as:
“Development of Crash Testing Methodology, to be carried out as part of the Australian New Car Assessment Program (ANCAP) investigating the impact of [the] Automotive Structural Design and Safety Features on serious injuries and fatalities, and Associated Development of Use Car Safety Ratings (UCSR).”
Innovation Australia decided on 4 October 2007 that RACV Sales’ activities did not satisfy the eligibility criteria under s 73B(1) as the activities did not involve innovation or high levels of technical risk. Therefore, it also decided to issue a certificate under s 39L of the IRD Act to reflect that decision. At the request of RACV Sales, Innovation Australia reviewed its earlier decision and, under s 39S of the IRD Act, it confirmed that earlier decision and commented that the activities were not systematic, investigative and experimental.
The AAT was of the view that Innovation Australia was correct in deciding that RACV Sales’ activities were not R&D activities as those activities are defined in s 73B(1). Therefore, it decided to affirm its decision to issue a certificate under s 39L of the IRD Act to that effect.
(AAT Case [2012] AATA 386, RACV Sales and Marketing Pty Ltd and Innovation Australia, AAT, Forgie DP, Ref No: 2010/1396, 26 June 2012.)
[LTN 125, 2/7]