Cultivating innovation: A guide to claiming the R&D Tax Incentive in the Agribusiness sector

First, you need to ensure your activities are not general BAU activities and meet the definition requirements. Activities undertaken to improve productivity or sustainability in Agribusiness are not necessarily undertaken for a significant purpose of generating new knowledge and therefore, may not be eligible for the RDTI, as raised by Taxpayer Alert 2017/4. This may be because:

• The activities are for operational purposes and therefore, the activities may be conducted for the purpose of production rather than generating new knowledge. 
• The outcome of the activities is well known in the Agribusiness sector.

Taxpayer Alert 2017/4 flags that activities claimed through the RDTI must follow a systematic progression of experimental work. Key considerations when determining whether experimental activities satisfy this requirement are as follows:

• An experiment in a farming context must be hypothesis-driven.
• It is important to clearly define the scale of the trial to distinguish the systematic progression of work from ordinary farming activities.
• Trials must identify and control as many variables as possible to order to isolate and evaluate each of the interventions against a control plot and be documented.
• Scientifically valid results will only be obtained from a well-designed experiment with sufficient trial plots that will provide statistically valid measurements.

All of these stages must be documented as evidence is always needed to support your claim and could be called upon in the event of a review by either regulator. 

Activities claimed through the RDTI cannot rely on existing knowledge and expertise to obtain its outcomes, as noted by Taxpayer Alert 2017/4. It is generally not sufficient for a company claiming a core R&D activity to rely on new knowledge propositions such as: 

• An established product or practice has not been used before at a particular location or on a particular crop. 
• A combination of established products or practices has not been used before at a particular location or on a particular crop. 

A particular focus area of the program announced in Taxpayer Alert 2015/3 is broadacre farming, which has been linked to the new knowledge, experimental, and established product/practice considerations noted above. This could be in relation to the use of soil improvers, including fertilisers, microbes, and other treatments.

Taxpayer Alert 2015/3 notes that if activities are being carried out across a whole farm (e.g. application of soil improvers), it is unlikely that the activity is being conducted for the significant purpose of generating new knowledge. Rather, it is more likely that a known technique or product is being used for a commercial purpose. This is broadly due to the following:

• There was sufficient confidence to apply the activities to the entire farm and therefore, the activities do not risk the production of the whole farm.
• The size of the land used in the trials was excessive in comparison to that which would be reasonably necessary to conduct an experiment to generate new knowledge.
• The reasons for applying the activities to the entire farm were for efficiency and cost reasons, rather than being scientifically necessary to generate new knowledge.