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As part of a range of initiatives to make Australian companies more internationally competitive, companies claiming the R&D Tax Concession need to plan their R&D activities prior to commencing any project.  The introduction of the R&D Plan requirement is to reinforce the need for companies to think strategically about their research and development activities as a critical and ongoing part of their business. R&D Plans support the successful management of R&D projects, providing focus and structure to research and development activities and thereby enhancing the likelihood of successful outcomes.

Activities within a project need to be presented with sufficient detail and clarity to enable the main steps involved in undertaking the project to be identified. If activities are described in an overly broad manner, the Board is unable to assess whether they satisfy the statutory requirements.

A good research and development record-keeping system will generate and maintain the following:

• the R&D Plan;
• records of any preliminary research;
• records of experiments; and
• the project evaluation.

Any preliminary research should be captured. This can include:

• literature and patent searches;
• feasibility studies and options papers; and
• risk management analysis.

In accordance with the legislative definition of R&D, the Board considers two categories of eligible activities:

• "systematic, investigative and experimental" (SIE) activities (previously termed "core" activities); and
• "directly related" activities (previously termed "supporting" activities)

It is important to note that the term SIE comprises all of the following aspects:

• systematic, investigative and experimental activities, which involve
• innovation or high levels of technical risk, and which are carried on
• for the purpose of acquiring new knowledge or creating new or improved materials, products, devices, processes or services.

Where the activities are carried on by way of the development of computer software, they cannot be taken to be SIE activities unless they are undertaken for purposes that include "multiple sale", as opposed to development solely for in-house use.

Exclusions

Activities that might otherwise meet the requirements for systematic, investigative and experimental activities are NOT eligible as systematic, investigative and experimental activities if they are on the list of exclusions.

The full list of activities which are excluded as systematic, investigative and experimental activities [subsection 73B(2C), ITAA 1936] is:

(a) market research, market testing or market development, or sales promotion (including consumer surveys);

(b) quality control;

(c) prospecting, exploring or drilling for minerals, petroleum or natural gas for the purpose of discovering deposits, determining more precisely the location of deposits or determining the size or quality of deposits;

(d) the making of cosmetic modifications or stylistic changes to products, processes or production methods;

(e) management studies or efficiency surveys;

(f) research in social sciences, arts or humanities;

(g) the making of donations;

(h) pre-production activities such as demonstration of commercial viability, tooling-up and trial runs;

(i) routine collection of information, except as part of the research and development process;

(j) preparation for teaching;

(k) commercial, legal and administrative aspects of patenting, licensing or other activities;

(l) activities associated with complying with statutory requirements or standards, such as the maintenance of national standards, the calibration of secondary standards and routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things;

(m) specialised routine medical care; and

(n) any activity related to the reproduction of a commercial product or process by a physical examination of an existing system or from plans, blueprints, detailed specifications or publicly available information.

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