Many companies fall into a common misconception when claiming the R&D Tax Incentive (RDTI)—assuming that as long as a project is “innovative” or involves substantial investment, it automatically qualifies as R&D.
In reality, the R&D Tax Incentive focuses on a more fundamental criterion, rather than project scale or industry label:
whether there is technical uncertainty that requires systematic experimentation to resolve.
If no technical hypotheses need testing, even highly innovative projects may not meet the core definition of R&D.
1. Activities That Are Typically Not Considered Core R&D
Common examples include:
Market research, product testing, promotions, and consumer surveys.
Mineral or petroleum exploration.
Management studies or efficiency improvements.
Social science, arts, or humanities research.
Patent applications and related legal or administrative work.
Compliance work aimed at meeting regulatory or industry standards.
Replicating existing products or processes.
Software development primarily for internal management purposes.
These activities share a common feature: they address business, management, or compliance issues, rather than resolving technical uncertainties.
2. Does This Mean They Can Never Be Claimed?
Not entirely.
While such activities generally cannot be claimed as standalone core R&D, in some cases they can be included as supporting activities, provided their primary purpose is to support an ongoing core R&D project.
In other words, supporting activities must serve the verification of technical hypotheses, rather than pursuing independent commercial or managerial goals.
3. Four Key Questions to Identify Supporting Activities
Companies can ask themselves:
Would this activity take place if there were no core R&D project?
Does it have an independent commercial purpose?
Is supporting technical experimentation the main reason for carrying out this activity?
Is it an essential step in testing a technical hypothesis?
Only when the primary purpose is supporting core R&D can the related expenditure potentially be included in a claim.
4. Two Typical Examples
Example 1:
Developing a program solely to study language patterns or improve teaching methods is considered social science research and is typically excluded from R&D tax claims.
However, if the research is intended to support the development of a new technology—such as a sensor that optimizes learning experiences via EEG detection—the work is no longer purely educational research; it becomes part of the technical experimentation process.
In this case, the activity may qualify as a supporting activity, provided its primary purpose is to advance the sensor’s technical R&D.
Example 2:
Patent applications and related legal or administrative work are generally not considered R&D.
But if a company conducts patent or prior-art searches to define technical boundaries, clarify R&D hypotheses, and design experimental paths accordingly, this work is preparatory for experimentation.
If it can be demonstrated that the main purpose is to support core R&D rather than merely filing patents, it may also be recognized as a supporting activity.
Conclusion
The R&D Tax Incentive is centered on experimental verification of technical hypotheses, rather than industry classification or project scale.
When claiming the incentive, companies should start from the perspective of technical uncertainty and carefully distinguish between core and supporting activities. This ensures compliance while maximizing the policy’s value.
If you are evaluating whether your existing projects qualify for the R&D Tax Incentive or are unsure which activities can be included in a claim, a structured review is recommended.
By clarifying the boundaries between core and supporting R&D from both technical and compliance perspectives, companies can significantly improve claim quality and success rates. For further discussion, we welcome you to contact us to clarify your R&D scope and eligibility.
Frequently asked questions
Q: Does an innovative or expensive project automatically qualify for the R&D Tax Incentive? A: No. According to the article, the R&DTI focuses on whether there is technical uncertainty that requires systematic experimentation to resolve, not on project scale, investment, or industry label. Even highly innovative projects may not meet the core definition of R&D if no technical hypotheses need testing, and eligibility is self-assessed against the ATO/AusIndustry criteria.
Q: What kinds of activities are generally not considered core R&D for the tax incentive? A: The article lists examples such as market research, product testing, promotions and consumer surveys; mineral or petroleum exploration; management or efficiency studies; social science, arts or humanities research; patent applications and related legal or administrative work; compliance work for regulatory or industry standards; replicating existing products or processes; and software developed mainly for internal management. These typically address business, management or compliance issues rather than resolving technical uncertainties, though whether an activity qualifies is self-assessed.
Q: Can activities that aren't core R&D still be included in an R&D Tax Incentive claim as supporting activities? A: The article says that while such activities generally cannot be claimed as standalone core R&D, they may in some cases be included as supporting activities if their primary purpose is to support an ongoing core R&D project. Supporting activities must serve the verification of technical hypotheses rather than pursue independent commercial or managerial goals.
Q: What questions can a company ask to work out whether an activity is a supporting R&D activity? A: The article suggests four questions: Would this activity take place if there were no core R&D project? Does it have an independent commercial purpose? Is supporting technical experimentation the main reason for carrying it out? Is it an essential step in testing a technical hypothesis? It notes that only when the primary purpose is supporting core R&D can the related expenditure potentially be included in a claim, which is assessed against the eligibility criteria.
