AAT flags importance of contemporaneous documentation to evidence R&D activity
The Administrative Appeals Tribunal (AAT) confirmed (on 16 December 2015) the findings by Innovation Australia (the Board) that the registered activities of a certain applicant were not core R&D activities, and hence ineligible, for the purpose of claiming the R&D tax incentive.
There were a number of contributing factors to the decision, however, the key message for applicants is that contemporaneous documentation is necessary to substantiate the R&D activities claimed. It was the absence of documentation that resulted in the AAT’s decision. Such documents are required for the purpose of evidencing experimental activities whose outcome cannot be known or determined in advance but can only be determined by applying a systematic progression of work based on established science; and which proceeds from hypothesis to experiment, observation and evaluation and leads to logical conclusions.
It is this process of initial research, fact finding, benchmarking and setting up of an activity that follows the scientific method and establishes that the purpose of conducting the activities is to generate new knowledge. Critically, the AAT judgement makes clear that an applicant cannot succeed in establishing those requirements in the absence of detailed documentation recording the process of each activity as it develops.
To view the full Decision please click here or call (02) 9126 9100 to discuss the case in more detail with a member of our R&D consulting team.