Angelina Lagana and Melissa Bader, who are the instructing solicitors for Moreton Resources Ltd, discuss the reasons behind the court’s decision.
The Full Federal Court in Moreton Resources Ltd v Innovation and Science Australia  FCAFC 120 handed down its decision on Thursday to allow an appeal made by Moreton Resources Ltd, with the matter remitted back to the Administrative Appeals Tribunal for determination.
The case concerned the question of whether activities undertaken in relation to an underground coal gasification pilot facility were core or supporting research and development activities pursuant to the provisions in Division 355 of the Income Tax Assessment Act 1997 (Cth).
The substantive issue on appeal was whether the Tribunal erred in its narrow construction of “core R&D activities”, and in doing so had implicitly rejected Moreton’s alternative submission that if the activities were not core, they were nonetheless “supporting R&D activities” because they were directly related to core R&D activities registered during an earlier income year.
Importantly and in a welcome development for taxpayers, the Full Court held that the Tribunal’s narrow construction of “core R&D activities” in the first instance was in error and to be set aside. Davies, Moshinsky and Steward JJ held that:
The reasons provided by the Full Court in this case are significant and provide much needed clarity as to the application of the research and development provisions. The decision also reiterates the importance of maintaining contemporaneous evidence to support R&D activities.
This article was first published on KPMG Tax Now.
To read more articles like this, please register for KPMG Tax Now.
© 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Liability limited by a scheme approved under Professional Standards Legislation.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.