The AAT has upheld an IR&D Board decision refusing to register a particular project for the purposes of the former R&D tax concession.
The taxpayer, an IT company, incurred expenditure in 2002-03 and 2003-04 in connection with a project that involved embedding heat resistant radio frequency identification (RFID) tags into moulds used to manufacture motor vehicle suspension parts, installing RFID readers to read the tags and collecting information about the moulds.
In order to claim the R&D tax concession under s 73B of the ITAA 1936, both the taxpayer and the project were required to be registered under the Industry Research and Development Act 1986. However, the IR&D Board (now called Innovation Australia) refused registration on the basis that the relevant activities did not satisfy the definition of “research and development activities” in s 73B. The AAT has upheld that decision.
The key issue was whether (in terms of the definition of “research and development activities”) the taxpayer’s activities – in particular one activity described as “experimentation with different RFID tags; prototyping and testing” – were “systematic, investigative and experimental”, involving “innovation” or “high levels of technical risk”. The AAT was satisfied that none of the taxpayer’s activities were undertaken in a “systematic, investigative and experimental” way and therefore the IR&D Board was justified in refusing to register the taxpayer and the project.
(AAT Case [2012] AATA 743, Re NaughtsnCrosses Pty Ltd and Innovation Australia, AAT, Ref No: 2010/2467, Hack DP, 24 October 2012.)
[LTN 210, 30/10]