The AAT has allowed most of a taxpayer’s claims for R&D expenditure at the 125% rate, but disallowed other claims in respect of overlapping expenditure.
- Between 2003 and 2007, the taxpayer undertook R&D, conducted by way of plant trials, to test various possible improvements to its copper and lead concentrators and its copper smelter.
- Many of the plant trials ran over several months.
- The taxpayer sought to deduct a considerable part of its expenditure incurred during those plant trials at the premium rate of 125%.
- For each of the relevant tax years, the Commissioner disallowed many, but not all, items of expenditure claimed to be “research and development expenditure” and, as such, deductable at the premium rate.
- The taxpayer sought review of these decisions.
- The Commissioner contended that the amounts were not deductible at the premium rate in each tax year because they were “feedstock expenditure”, which is expressly excluded from the statutory definition of “research and development expenditure”.
- He also argued that, due to an overlap of the taxpayer’s R&D activities at its Mt Isa copper concentrator and Mt Isa smelter, certain expenditure became “feedstock expenditure” and was not deductible at the 125% rate.
After analysis of the complex factual situation, and application of the law, the Tribunal was of the view the taxpayer was entitled to substantially succeed on the first principal issue, but it accepted the Commissioner’s argument on the overlap issue.
(AAT Case [2014] AATA 515, Re GHP 104 160 689 Pty Ltd and FCT, AAT, Kerr P, AAT Ref: 2011/4618, 4619, 4674, 29 July 2014.)
[It is understood the Commissioner has appealed to the Federal Court against the decision.]
[LTN 170, 3/9/14]