R&D projects involve more than experiments. Teams prepare equipment, investigate prior knowledge, collect information and complete other tasks around the work. The challenge is to assess each activity according to what it actually does and why it is undertaken. Calling something supporting R&D does not remove the need to explain its relationship to a core activity or satisfy the applicable requirements.
Start with the core activity
Identify the experimental work being supported. Core activities must satisfy the statutory definition, including the required uncertainty, systematic progression and new-knowledge purpose. [R4] Without a sufficiently clear core activity, it becomes difficult to explain why another task has the required direct relationship to it. A broad reference to the development project is not a substitute for that analysis.
Create a practical map of the work. Place the proposed core activity at the centre and identify the tasks said to support its planning, execution or evaluation. For each task, write a short explanation of its role. This exercise can expose activities included because they sit in the same department or budget, rather than because their relationship has been established.
Explain the direct relationship
Supporting activities must be directly related to core R&D activities. Certain activities must also be undertaken for the dominant purpose of supporting core R&D, including activities excluded from core status and activities producing, or directly related to producing, goods or services. [R7] The additional purpose requirement is therefore not a universal shorthand to apply without considering which category is involved.
A hypothetical equipment task illustrates the question. Preparing apparatus specifically for an experiment may have a different relationship to that experiment from general maintenance across a commercial facility. The activity description should identify the actual task, its purpose and the connection claimed. The fact that the same equipment is involved does not answer every eligibility question.
Consider mixed purposes
Where the dominant-purpose test applies, examine why the activity was undertaken and the relative importance of its purposes. [R7] If an activity supports both an experiment and ordinary production, explain the circumstances rather than relying on a generic statement that all work was necessary for R&D. Ask what the team intended and what the contemporaneous record shows.
The classification should also make sense to the people conducting the work. Discuss the proposed boundaries with engineering, operations and finance together. If the technical description covers a small task but the cost allocation includes an entire department, investigate the mismatch. Activity eligibility and expenditure allocation require separate analysis, but their factual foundations should remain consistent.
Record the reasoning
Keep a short record explaining the proposed classification, the relevant core activity, any additional purpose test and the supporting evidence. Revisit it when the work changes. A project may move from experimentation into implementation or commercial operation, and the earlier description should not simply be copied forward without considering the new facts.
Ardian Law can help assess activity boundaries and the legal basis for core and supporting classifications. Call 02 8111 7700 if your team or existing adviser needs assistance with a difficult distinction before registration or during a review.