• The AAT’s decision supports the department’s position that when the outcome of activities can be known or determined in advance, this is sufficient by itself for there to be no core R&D activities.
  • Key points from the AAT’s decision include:
    • There will be no core R&D activities where the outcome of the activities are known or able to be determined in advance. This reason alone is sufficient for activities not to be core R&D activities.
    • A task which is difficult does not necessarily involve an uncertain outcome.
    • Uncertainty stemming from an absence of control by the R&D entity doesn’t necessarily constitute uncertainty of outcome.

Federal Court decision – H2O Exchange Pty Ltd v Innovation Science and Australia


On 22 January 2021, the Federal Court dismissed the appeal by H2O Exchange Pty Ltd (H2O) from a decision of the Administrative Appeals Tribunal (AAT) which found H2O’s claimed activities were not “R&D activities” within the meaning of the Income Tax Assessment Act 1997.

The Court did not agree with H2O’s claims that the AAT had denied H2O natural justice nor that the AAT’s decision was irrational and illogical.

Read the full AAT decision on H2O Exchange Pty Ltd and Innovation and Science Australia

Read the full FCA judgment on H2O Exchange Pty Ltd v Innovation and Science Australia