The R&D tax credit has been repealed, effective from the 2009-10 income year. It is still available for qualifying expenditure on R&D activities carried out in the 2008-09 income year. Find out more about the R&D tax credit repeal >
Tax agents: To file a detailed statement on behalf of a client, you must upgrade your online services user ID to access your client's detailed statement. For help, ask the online services support person or administrator in your office, or contact the R&D tax credit team.
Determining when eligible R&D activities start and finish
Start of eligible R&D activities
Eligible R&D activities can begin when work to define the scientific or technological uncertainty begins, or when work on the appreciably novel proposal begins.
The eligible R&D activities end when the scientific and technological uncertainty is resolved (or work to resolve it stops), or when the novel development is technically completed (or work on it stops).
Work to establish novelty or uncertainty
Work to review the state of knowledge or technology will be required for you to establish eligibility for the tax credit. Find out more about R&D activities aimed at resolving scientific or technological uncertainty, and R&D activities involving an appreciable element of novelty.
This work is eligible as a support activity if it leads to SIE activities. If, however, discussion with a consultant or industry expert identifies an existing solution, there is no uncertainty or appreciable novelty and no claimable activity.
End of eligible R&D activities
Eligible R&D activity ends when:
- the scientific or technological uncertainty is resolved. This might be when the solution is documented in a way a professional can use or when a prototype that fully meets the technical specifications is developed, or
- the novel development of the technology is documented or a prototype that fully meets the technical specifications is produced, or
- SIE activities directed towards resolving the uncertainty or developing the technology are abandoned.
An R&D project may have a number of technological objectives, only some of which give rise to uncertainty or novelty for the purpose of the tax credit.
The eligible R&D activity ends when the objectives which led to uncertainty or novelty are met or abandoned.
Ineligible activity following end of eligible R&D activity
When the uncertainties have been resolved and documented or a prototype or novel application of the technology developed, the eligible R&D activity is finished. Subsequent activities on the overall project are ineligible for the tax credit, for example training staff or customers in how to use the product, product documentation for customers, styling and market research to finalise product characteristics and marketing.
Example - beginning and end of R&D
Eligible activities at the start of the R&D project for the company in the sportswear fabric example (see example - identifying technological uncertainty and SIE activities) would include work performed to determine that no polyamide fabric with 25% stretch on both warp and weft exists, and competent professionals being uncertain how to achieve it. Eligible support activities might include work done to:
- develop the hypothesis
- further define the technological objectives
- plan the trials.
Eligible R&D activities end when the trials establish that the new yarn and processes produce a fabric that meets the firm’s technical requirements (25% stretch in both warp and weft directions and the retention of other characteristics such as durability and dye uptake).
Subsequent work, such as demonstrating the new processes to the board and customers and work to patent, market and tool-up for full-scale production, are ineligible activities.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
Example - technology transfer
A horticultural industry research co-operative (IRC) contracts with a CRI to research methods of controlling an emerging fungal pest. Trials are run on four sites over three years, investigating crop management techniques and the timing of various sprays.
Trial results are prepared in several forms:
- progress and final research reports to the IRC describing research methodology and technical results
- publications in peer-reviewed horticultural journals
- a simplified progress and final report available to growers upon which to base their commercial crop decisions
- field days with growers and researchers to discuss results.
The activities required for trial development and implementation, through to reporting the research to the client and in horticultural journals are likely to be eligible R&D activities. Producing reports, articles and findings for use by farmers and the time and cost of communicating research findings through field days follow the resolution of the scientific or technological uncertainty. These activities are therefore ineligible. Field days reporting progress during the course of the research would not be eligible as a support activity.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
Resolving remaining uncertainty
If a process or product has been developed in a research environment there may be genuine technological uncertainty about how to produce it in commercial quantities in a production environment. Activities directed towards resolving this type of uncertainty are not excluded from eligibility under the exclusion relating to pre-production activities.
The key question is whether genuine uncertainty remains or whether the testing and pre-production work is standard practice. A competent professional in the field should be able to answer this question.
Resuming R&D activity
R&D activity can recommence if problems develop after the conclusion of R&D and work aimed at resolving technological or scientific uncertainty resumes.
The test for recommencement is the same as the initial test for eligibility.
Make sure you distinguish between genuine new R&D activity and routine fault-finding. These latter activities are ineligible because they do not satisfy the tests of scientific or technological uncertainty or appreciable novelty.
Find out more
- What is research that is systematic, investigative and experimental?
- R&D activities aimed at resolving scientific or technological uncertainty
- R&D activities involving an appreciable element of novelty
- R&D activity need not be successful to be eligible
- Support activities
Date published: 24 Mar 2009
Back to top
