NCC Compliance Testing Cannot Be Core R&D — But It May Be Supporting, and Developing the System You Test May Be Core

As at 27 July 2026, the Australian Government had announced reforms to the R&D Tax Incentive in the 2026–27 Federal Budget, intended to apply to income years starting on or after 1 July 2028. Until those changes take effect, the program continues to operate under the current legislation, and we cover the announced measures in the proposed $50,000 Budget measure.

Building-product businesses may assume that a substantial testing programme supports an R&D claim, particularly where it involves rigs, furnaces, accredited laboratories and costly specimens. It can look like research because it involves measurement.

The R&D Tax Incentive draws a narrower distinction. The shorthand conclusion that "compliance testing is not R&D" is too broad: activities associated with complying with statutory requirements or standards cannot be core R&D activities under s 355-25(2)(f) of the Income Tax Assessment Act 1997, set out on the department's excluded R&D activities page. However, they may still qualify as supporting R&D activities where they are directly related to one or more core R&D activities and undertaken for the dominant purpose of supporting them. The development work that produced the item being tested must be assessed separately. I write as a Registered Research Service Provider (RSP000047): we supply research capability, not tax advice.

The Exclusion, in the Government's Own Words

The excluded-activities page covers compliance with statutory requirements or standards, "including" maintaining national standards, calibrating secondary standards, and "routine testing and analysis of materials, components, products, processes". It draws the line in both directions:

The department's built environment sector guide names the scenario exactly: tests "to show that a particular design complies with a relevant required standard, such as meeting provisions of the National Construction Code". It adds that "activities working out how to comply with a standard would be activities associated with complying" — then states the carve-out this article turns on: the exclusion "is not intended to exclude experimental activities that are undertaken to develop a new product or service which must incidentally meet some regulatory requirement or standard."

The diagnostic is not the decision, though: purpose alone does not determine classification. An activity run to resolve a genuine unknown must still satisfy the core requirements in its own right — an outcome not knowable in advance, and a systematic progression of work — and one you want to treat as supporting must still be directly related to a core activity and, where s 355-30(2) is triggered, meet the dominant-purpose test.

Which Edition Applies, and Where to Check

NCC 2025 was published on 1 May 2026. In South Australia, the Plumbing Code of Australia provisions commenced on 1 May 2026, while the Building Code of Australia provisions are scheduled to commence on 1 May 2027. Other jurisdictions have their own adoption and transition arrangements; check the current ABCB adoption information before relying on an edition or date. The Board also warns that some requirements may apply at different times, or not at all, because of jurisdictional variations.

What the Developing Side Has to Show

A core R&D activity is experimental work conducted to generate new knowledge, where the outcome cannot be known or determined in advance and can only be determined by a systematic progression of work based on established science, from hypothesis to experiment, observation and evaluation (conducting core R&D activities, business.gov.au).

“Cannot be known in advance” is measured against a competent professional in the field, based on knowledge publicly available or reasonably accessible anywhere in the world. Some building-product activities may therefore not qualify where they apply established techniques, materials or designs to particular site conditions and the outcome could be determined in advance. Activities that only apply established materials or processes to local conditions, the department says, “are unlikely to qualify as core R&D activities”.

Conservatism can also be wrong. After Moreton Resources Limited v Innovation and Science Australia [2019] FCAFC 120, the department accepts that applying existing technology "in a different context or location" is capable of meeting the core definition, provided all legislative requirements are met — so "we used a known material" does not end the enquiry.

One Project, Two Test Programs

Stop treating "the testing" as one thing. Take an Adelaide manufacturer developing a lightweight composite wall panel; figures illustrative only.

Program A — development testing: The team cannot predict, from suppliers' data or accessible literature, how the bond between the new core and the facing behaves at the panel-to-slab junction under thermal cycling and load. They state a hypothesis, build a specimen series varying two parameters, instrument it, record the failures and revise. Roughly $95,000 of a $260,000 program. This is the candidate core activity.

Program B — certification testing: The final panel goes to an accredited laboratory for the full-scale tests the Code calls up, and the results go into a report for the certifier. Roughly $165,000 — the larger component and the part directed at demonstrating compliance.

The supporting route is real, but narrower than it looks. An excluded activity can still be supporting, but only if directly related to a core R&D activity and, because s 355-30(2) is triggered, undertaken for the dominant purpose of supporting it (conducting supporting R&D activities, business.gov.au). Dominant purpose means the prevailing or most influential purpose, so a test required primarily for certification may make that requirement harder to establish.

What to Do Before the Next Test Program

Any offset is calculated on the eligible slice, not the $260,000; which offset applies is covered in refundable vs non-refundable offset.

The Australian Government announced reforms to the R&D Tax Incentive in the 2026–27 Budget, intended to apply to income years starting on or after 1 July 2028. Until those changes take effect, the program continues to operate under the current legislation; see our dedicated Budget update for the proposed measures and their status.

Frequently Asked Questions

Q: Is building code compliance work eligible for the R&D Tax Incentive?
A: Not as a core R&D activity — s 355-25(2)(f) excludes activities associated with complying with statutory requirements or standards, and that extends to working out how to comply. It may still qualify as supporting where directly related to a core activity and, where s 355-30(2) is triggered, conducted for the dominant purpose of supporting it. You self-assess.

Q: Is certification or standards testing an eligible R&D activity?
A: Not as a core activity: testing undertaken to demonstrate conformity or gain certification falls within s 355-25(2)(f). It may qualify as supporting R&D where it is directly related to a core activity and undertaken for the dominant purpose of supporting it. A separate experimental activity conducted to develop the product may qualify as core R&D if it independently satisfies the requirements in s 355-25(1).

Q: Is developing a new building material or wall system R&D?
A: It may be. The bar is the same as any sector: the outcome could not be known in advance by a competent professional using publicly available or reasonably accessible knowledge, and can only be determined by a systematic progression of work conducted to generate new knowledge. Applying established designs to a new site generally does not clear it; an unresolved failure mechanism may.

Q: Can we claim thermal or acoustic performance testing?
A: It depends on the purpose and scope of the activity. Testing undertaken to show that a design meets the Code is excluded from core R&D, although it may qualify as supporting R&D where the applicable requirements are met. A separately scoped experimental activity using thermal or acoustic measurements to resolve a technical unknown may be candidate core R&D, provided it is not itself undertaken to demonstrate compliance and satisfies the unknown-outcome and systematic-progression requirements.

Sources & Further Reading

• Excluded R&D activities under the R&D Tax Incentive — business.gov.au

• Conducting core R&D activities — business.gov.au

• Conducting supporting R&D activities — business.gov.au

• Built environment sector guide — business.gov.au

• Check if you are eligible — business.gov.au

• Get help from a research service provider — business.gov.au

• Income Tax Assessment Act 1997 (Div 355: ss 355-25, 355-30, 355-100, 355-225) — legislation.gov.au

• NCC 2025 state and territory adoption information — check your jurisdiction before citing any Code provision

• Related: property and construction · what does not qualify · under $20,000 · refundable vs non-refundable