Frequently Asked Questions

R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology. The activities that directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D.

Certain qualifying indirect activities related to the project are also R&D.

NOTE: Activities other than qualifying indirect activities that do not directly contribute to the resolution of the project's scientific or technological uncertainty are not R&D.

An advance in science or technology means an advance in overall knowledge or capability in a field of science or technology (not a company's own state of knowledge or capability alone). This includes the adaptation of knowledge or capability from another field of science or technology in order to make such an advance where this adaptation was not readily deducible.

An advance in science or technology may have tangible consequences (such as a new or more efficient cleaning product, or a process which generates less waste) or more intangible outcomes (new knowledge or cost improvements, for example).

NOTE: A process, material, device, product, service or source of knowledge does not become an advance in science or technology simply because science or technology is used in its creation. Work that uses science or technology but which does not advance scientific or technological capability as a whole is not an advance in science or technology.

Even if the advance in science or technology sought by a project is not achieved or fully realised, R&D still takes place.

If a particular advance in science or technology has already been made or attempted but details are not readily available (for example, if it is a trade secret), work to achieve such an advance can still be an advance in science or technology.

NOTE: The routine analysis, copying or adaptation of an existing product, process, service or material, will not be an advance in science or technology.

Scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field. This includes system uncertainty. Scientific or technological uncertainty will often arise from turning something that has already been established as scientifically feasible into a cost effective, reliable and reproducible process, material, device, product or service.

NOTE: Uncertainties that can readily be resolved by a competent professional working in the field are not scientific or technological uncertainties. Similarly, improvements, optimisations and fine-tuning that do not materially affect the underlying science or technology do not constitute work to resolve scientific or technological uncertainty.

A project consists of a number of activities conducted to a method or plans in order to achieve an advance in science or technology. It is important to get the boundaries of the project correct. It should encompass all the activities that collectively serve to resolve the scientific or technological uncertainty associated with achieving the advance, so it could include a number of different sub-projects.

NOTE: A project may itself be part of a larger commercial project, but that does not make the parts of the commercial project that do not address scientific or technological uncertainty into R&D.

R&D begins when work to resolve the scientific or technological uncertainty starts, and ends when that uncertainty is resolved or work to resolve it ceases.

R&D ends when knowledge is codified in a form usable by a competent professional working in the field, or when a prototype or pilot plant with all the functional characteristics of the final process, material, device, product or service is produced.

Although the R&D for a process, material, device, product or service may have ended, new problems that involve scientific or technological uncertainty may emerge after it has been turned over to production or put into use. The resolution of these problems may require new R&D to be carried out. But there is a distinction to be drawn between such problems and routine fault fixing.

NOTE: Work to identify the requirements for the process, material, device, product or service, where no scientific or technological questions are at issue, is not R&D.

Scientific or technological planning activities associated with a project directly contribute to resolving the scientific or technological uncertainty associated with the project and are therefore R&D. These include defining scientific or technological objectives, assessing scientific or technological feasibility, identifying particular scientific or technological uncertainties, estimating development time, schedule, and resources of the R&D, and high-level outlining of the scientific or technical work, as well as the detailed planning and management of the work.

NOTE: Elements of a company's planning activity relating to a project but not directly contributing to the resolution of scientific or technological uncertainty, such as identifying or researching market niches in which R&D might benefit a company, or examination of a project's financial, marketing, and legal aspects, fall outside the category of scientific or technological planning, and are therefore not R&D.