Agrifood R&D Tax Incentive Case Study

AgriSolve AU incurred expenditure on R&D salaries, travel to field experiment sites, consumables in the form of agrichemicals, third party contractor costs, and overheads. 

Even though the R&D was initiated following a discussion with one of AgriSolve AU’s largest customers, AgriSolve AU was not undertaking the R&D for this specific customer, nor did it charge the customer at any stage of the R&D project. AgriSolve AU conducted the R&D in the hope of developing a new, innovative product that it could then add to its retail range and use to generate revenue across its entire customer base. 

AgriSolve AU is a Pty Ltd company incorporated in Australia that is a subsidiary wholly owned by AgriSolve Holdings Pty Ltd. AgriSolve Holdings Pty Ltd is the head company of the consolidated group and thus the R&D entity. AgriSolve AU is named as the subsidiary company that performed R&D activities.

To substantiate the R&D activities carried out, AgriSolve kept documentation including formulation and process development reports as well as field trial protocols and reports. These records are beyond what standard product developments would require as the experimental nature of the work is demonstrated using:

• Research papers and general database searches (APVMA, patent, product) conducted to support the knowledge gap.
• Formulation and process development reports that detailed each systematic iteration and technical challenges that arose and how they were overcome.
• Field experiment protocols preceded detailed field experiment reports that included the objectives, crop information and set-up, experimental/testing methods (i.e. the different variables tested), observations and photos at set time points, analysis of results and conclusions. 
• Lessons learnt documents highlighting conclusions drawn from the evaluation of test results obtained from the trials. 
• Internal communications such as meeting minutes and email correspondence demonstrating iterative development processes and uncertain outcomes. 

To demonstrate the time spent on R&D, AgriSolve tracked all staff time by manual allocation (against individual field experiments and relevant meetings) of hours using a spreadsheet. Invoices and contracts with third party were sufficiently detailed to distinguish between eligible R&D activities (core or support) and ineligible activities.

• Ensured that the correct R&D entity was identified along with the subsidiary company conducting the R&D work. 
• Prepared the R&D expenditure calculations and information for the R&D Tax Incentive Schedule. As the company had an aggregated turnover of more than $20M, it was eligible for the non-refundable tax offset. NOAH further helped with the two-tiered R&D premium calculation.
• Conducted education sessions on the key program eligibility criteria and encouraged staff participation in the R&D claims process. 
• Drafted the technical descriptions of the core and supporting with sufficient detail to allow AusIndustry to understand how those activities met the eligibility requirements.
• Improved the company’s record keeping systems and processes to contemporaneously identify, evaluate and record R&D activities as well as any associated time spent, and expenditure incurred.
• Kept the business informed of the latest case law, guidance and expectations from the regulators (AusIndustry and ATO) expressed through taxpayer alerts and industry reference group meetings.