Agrifood R&D Tax Incentive Case Study

Case Study – AgriSolve AU

Agrifood related R&D activities

Agrifood projects with eligible R&D activities can include:

  • Development of new or improved agrichemicals to create more eco-friendly/sustainable products, lower input, enhanced crop yield, reduced costs, greater pesticide control etc.
  • Development of new farming practices (Methods of Application, irrigation regimes, planting densities etc.) using new or improved agrichemicals or existing chemical technologies in a different location or context that involves uncertain outcomes.
  • Development of new or improved technologies to help extend the shelf-life and quality of harvested produce.

Companies claiming agrifood R&D activities can range from startups to large multi-nationals, research-based formulation development companies, agrichemical manufacturers or agrichemical retailers wishing to extend their product offerings.

Case Study – AgriSolve AU

AgriSolve regularly conducts a range of projects that includes agrichemical development and field experiments in order to develop new or improved products for the company’s range and to subsequently enhance its marketplace positioning.

One area of research is the development of an dual functional fertiliser in the form of emulsifiable concentrate that addresses nutrient deficiencies whilst allowing for greater water retention. 

Through background research AgriSolve AU found the existing state of the art product to be in the form of a suspension concentrate, and is thus unable to meet the product requirement.

AgriSolve AU engaged a formulation development consultant to design and produce the prototype formulations at lab- and pilot-scale (to ensure scalability of a new production protocol). The AgriSolve AU R&D agronomists then designed field experiments to test two candidate formulations via different Methods of Application and to assess the safety and efficacy of each formulation under different conditions. Field trial consultants were recruited to set-up small-scale, controlled and replicated field experiments at their research locations based on the protocol developed by AgriSolve AU. The field experiments were monitored, crops were harvested and samples were collected for nutritional analyses by AgriSolve AU.

AgriSolve AU self-assessed that the formulation development of the new combinatorial emulsifiable concentrate and the following field experiments met the requirements to be a core R&D activity because:

  • There was limited current knowledge on the specific combination of fertilising and water retention chemicals and the surfactant/solvent system(s) required to produce and maintain a stable emulsified concentrate.  
  • Knowledge regarding how the potential water retention chemicals would interact with the other constituents in the formulation was unavailable as they had never before been used in an emulsifiable concentrate formulation type.
  • It could only determine the outcome through a systematic progression of work that is based on the principles of established science, in this case the fields of chemical engineering and agronomy. 
  • It planned to generate new knowledge about:
    • The chemical technologies required to stably emulsify the active ingredients and synergistic excipients.
    • The most optimal rates and timings of application via the mode of fertigation to overcome the nutrient deficiencies whilst retaining water in the crop at imperative stages of growth to maximise the yield at the time of harvest.
    • The safety and efficacy of the new agrichemical.

Additional activities carried out during the project such as full-scale production of the chosen formulation following successful field experiments did not meet the definitions of core or supporting R&D activities. 

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. 

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