Quick answer: Exploration is explicitly carved out: prospecting, exploring or drilling for minerals or petroleum is excluded from being a core R&D activity where it is done to discover deposits or determine their location, size or quality. It can still be a supporting activity where it is directly related to, and conducted for the dominant purpose of supporting, an eligible core activity — AusIndustry's own example is drilling and assay work feeding the development of a new refining process. Potentially eligible mining R&D may instead arise in areas such as metallurgy, recovery, water and tailings, and automation, subject to the ordinary eligibility tests. You self-assess.
28 July 2026 — this article describes the current rules. The 2026-27 Federal Budget announced R&DTI changes scheduled to start 1 July 2028; those are not yet law, and we cover them separately in the proposed $50,000 Budget measure.
There is currently no dedicated mining sector guide on business.gov.au (though there are agrifood, energy, manufacturing and built-environment guides). For resources companies, the general eligibility framework, the Guide to Interpretation and relevant sector guidance provide the main reference points.
South Australia makes this particularly relevant. Copper, critical minerals and the processing and services businesses around them generate technical development work that can raise both R&DTI opportunities and exclusions.
The Exclusion Every Resources Company Runs into First
Subsection 355-25(2) of the Income Tax Assessment Act 1997 lists categories of activity that cannot be core R&D activities. One of them is squarely aimed at this sector: prospecting, exploring or drilling for minerals or petroleum, where the purpose is discovering deposits, determining more precisely the location of deposits, or determining their size or quality (business.gov.au).
Read the purpose limb, because it is doing all the work. The exclusion is defined by what the drilling is for, not by the fact that a rig turned. Drilling to find out what is in the ground is excluded. Drilling to generate the material or the data an experiment needs is a different purpose — and that is the door AusIndustry leaves open.
Other categories in the same subsection catch resources businesses regularly, and are worth naming because they describe a great deal of what mine sites do well:
Management studies and efficiency surveys: Debottlenecking, optimisation and throughput improvement programmes need careful analysis because management studies and efficiency surveys are specifically excluded from being core R&D activities, while genuinely experimental activities may need to be assessed separately against the core R&D criteria. We have written separately in our Insights about the difference between an efficiency survey and an experiment.
Activities associated with complying with statutory requirements or standards: Regulatory monitoring, rehabilitation obligations and compliance testing are excluded from core, however technically demanding.
Reproducing a commercial product or process: Reproducing a product or process by a physical examination of an existing system, or from plans, blueprints, detailed specifications or publicly available information.
The excluded categories are excluded from being core activities. They are not automatically excluded from the claim.
The Supporting-Activity Door — and Its Dominant-Purpose Lock
Activities that are not core may still be supporting R&D activities where they are directly related to core R&D activities. Where the activity produces goods or services, is directly related to producing goods or services, or is of a kind excluded from being a core activity, there is an extra condition: it must be conducted for the dominant purpose of supporting a core activity (business.gov.au).
AusIndustry's own worked example is the one to memorise: If you drill for mineral samples and analyse them to evaluate the quality of the deposit, and then use that information to design, conduct or evaluate experiments within a systematic progression of work to develop a new or improved mineral refining process, the drilling can potentially qualify as a supporting activity for that refining development.
Note what the example requires. There has to be a real core activity — the refining-process development — for the drilling to support. The drilling has to feed it. And "dominant purpose" is a genuine hurdle, not a formality: a drilling programme undertaken primarily for resource definition, where samples are also used by the metallurgical programme, may be more difficult to support under the dominant-purpose test. A useful question is: would this drilling have been done, in this way, at this scale, if the experimental programme did not exist?
Where the Core Activity Usually Is
Potential core R&D activities in the resources sector may arise downstream of the resource-definition question, depending on whether the statutory core R&D criteria are met.
Often closer to core R&D
Usually not core R&D
Developing a recovery or leach route for an ore body whose behaviour cannot be predicted from established flowsheets
Applying an established flowsheet to a new but comparable ore
Metallurgical test work designed to resolve a stated unknown, with hypotheses and controls
Assay and characterisation to define the resource
Developing treatment for a water, tailings or acid-drainage problem where no reliable existing solution applies
Monitoring and reporting to meet licence conditions
Developing autonomy, sensing or control technology whose achievable performance is genuinely unknown
Installing and commissioning proven automation
Trials to establish whether a novel comminution or separation approach works at scale
A plant trial to tune a known process to a known target
The last row is where a lot of value is won or lost. A plant trial is not automatically an experiment and not automatically an efficiency survey. What separates them is whether the outcome was knowable in advance and whether the work was designed to find out — hypothesis, variables, measurement, evaluation — or designed to reach a production target. Contemporaneous records of the unknown, hypothesis, experiment and evaluation can provide important evidence supporting that distinction.
METS Suppliers: A Different Question Entirely
Mining Equipment, Technology and Services (METS) providers build the technology miners use. Their development is often funded, in whole or part, by the miner who wants the solution — which brings two additional issues into focus:
Was the expenditure at risk?
Section 355-405 has two limbs: the consideration must be received or reasonably expected as a direct or indirect result of the expenditure being incurred, and expected regardless of the results of the activities (ATO, TR 2021/5). Where both are met, the notional deduction is removed to that extent. A development funded on a cost-reimbursement basis is far more exposed than one the supplier funds itself against a hoped-for supply agreement, and the rule operates to the extent of the funding rather than on the whole programme.
Who was the activity conducted for?
Section 355-210 requires, broadly, that the activity was conducted for the R&D entity claiming it. You assess that yourself on the whole of the circumstances, applying the legislation and the ATO’s guidance, which asks who receives the major benefit — informed by effective ownership of the results, control of the activities and who bears the financial risk. A trial conducted on a client's site, to the client's specification, with the results assigned to the client, is a very different case from one where the supplier directs the work and keeps the know-how.
Both questions are worked through in more depth in our article on funded development in the defence and space supply chain, in our Insights — the analysis transfers directly.
Two Mechanics Worth Planning For
Plant, rigs and pilot equipment: Expenditure on acquiring or constructing buildings is not claimable as R&D expenditure in the ordinary way, and where a depreciating asset is used for R&D activities the notional deduction generally comes through its decline in value rather than its cost (ATO). For a capital-intensive sector that is a material planning point, and we cover the mechanism separately.
Trial output that gets sold: Where R&D activities produce something that is sold or applied to your own use — concentrate from a pilot run, metal from a trial circuit — the feedstock rules may trigger a feedstock adjustment. Under the current rules, the feedstock adjustment is generally determined by reference to the lesser of the feedstock revenue and the relevant notional deductions attributable to producing the feedstock output; that amount is then taken into account under the applicable clawback calculation. Keep trial inputs and outputs identifiable in the period they occur.
Where an RSP Fits
AusIndustry describes Research Service Providers as scientific or technical service providers you can engage to conduct R&D activities on your behalf, registered in specific fields of research (business.gov.au). For a mining or METS business, an RSP can assist with experimental design, technical R&D work and supporting records within the fields for which it is registered.
For smaller METS companies there is a threshold point too. R&D expenditure for the income year must generally be at least $20,000 — that is the lower bound of the entitlement in s 355-100(1) of the ITAA 1997 (ATO). Qualifying expenditure incurred to a non-associate RSP may still form part of the offset where total notional deductions are below the usual $20,000 threshold. Precisely: where total notional deductions fall below A$20,000, the offset base is generally limited to qualifying expenditure incurred to a non-associate RSP for services in a field for which it is registered, together with eligible CRC Program contributions — the substituted base set out in the table in s 355-100(2) — other in-house amounts do not automatically join that base. See claiming R&D under $20,000. Using an RSP does not guarantee eligibility — you still self-assess, and an RSP supplies research capability, not tax advice.
What the 2026-27 Budget Announced
The 2026–27 Federal Budget announced proposed R&DTI reforms for income years starting on or after 1 July 2028. The measures are not yet law. Until any amendments take effect, current-year R&DTI claims continue to be assessed under the existing rules. See our Budget update for further details on the proposed changes and their status.
Frequently Asked Questions
Q: Is exploration drilling eligible for the R&D Tax Incentive?
A: Not as a core R&D activity. Prospecting, exploring or drilling for minerals or petroleum is excluded from being a core activity where the purpose is discovering deposits or determining their location, size or quality. It may still qualify as a supporting activity where it is directly related to, and conducted for the dominant purpose of supporting, an eligible core activity. You self-assess.
Q: Can drilling ever be a supporting R&D activity?
A: Yes, on AusIndustry's own example: drilling for samples and analysing them, where that information is then used to design, conduct or evaluate experiments within a systematic progression of work developing a new or improved refining process. The core activity has to genuinely exist, the drilling has to feed it, and the dominant-purpose test has to be met on the facts.
Q: Can mineral processing or metallurgical test work be claimed as R&D?
A: It can, where the outcome could not be known or determined in advance on the basis of current knowledge and could only be determined by a systematic progression of work conducted to generate new knowledge. Characterisation and assay work to define a resource generally sits on the excluded side; developing a recovery route whose behaviour is genuinely unpredictable generally does not.
Q: Can a METS supplier claim R&D on equipment developed for a mine?
A: Potentially, but two conditions apply at once. Expenditure is not notionally deductible to the extent it is not at risk under s 355-405 — which requires both that the consideration be expected as a result of the expenditure being incurred and that it be expected regardless of the results of the activities. That is live where the miner funds the development. And the activity must have been conducted for the supplier under s 355-210, decided on the whole of the circumstances, weighing effective ownership of the results, control and financial risk.
Sources & Further Reading
business.gov.au — Sector guides for R&D Tax Incentive applicants
ATO — Eligibility for the R&D tax incentive — the $20,000 lower bound (s 355-100(1)) and the substituted RSP/CRC base (s 355-100(2))
ATO — Tax Reform: better targeting the R&D Tax Incentive — the announced 1 July 2028 measures and their status
legislation.gov.au — Income Tax Assessment Act 1997 — Div 355, incl. ss 355-25, 355-210, 355-405
Related: what does not qualify · R&D by industry · R&D Tax Incentive in Adelaide · what an RSP is · claiming R&D under $20,000
Talk to Ignition Research before you structure your next test program. As a Registered Research Service Provider at Lot Fourteen in Adelaide, we assist mining, METS and process engineering companies with experimental design, technical R&D work and supporting records within our registered RSP scope. We are not a registered tax agent: your company self-assesses and remains responsible for its own claim, with advice and lodgement handled by your tax adviser. Get in touch.
This article is general information from a Registered Research Service Provider about the R&D Tax Incentive. It is not tax, legal or financial advice; eligibility depends on your circumstances and you should self-assess and seek your own advice.
Thinking about a project like this?
If you're weighing up an AI, software or technical improvement project and can't tell yet whether it's implementation or research, start with a quick read on where it sits.