What qualifies as Core R&D activities?

1. Overview

A Core R&D activity is an experimental activity that seeks to resolve a genuine technical uncertainty.

Under Division 355 of the Income Tax Assessment Act 1997, an activity may qualify as Core R&D if:

• The outcome could not be known or determined in advance
• There was a real technical uncertainty to solve
• The activity involved systematic experimentation
• The purpose was to generate new technical knowledge

In simple terms, Core R&D is not routine development. It is the part of your work where you are testing, proving, or disproving whether something technically possible can be achieved.

Supporting activities may only be claimed if they relate directly to one or more Core R&D activities.

2. Why This Matters for R&D Compliance

Correctly identifying Core R&D activities is central to your R&D Tax Incentive claim.

Core activities determine:

• Whether your project is eligible under Division 355
• Which Supporting activities can be included
• How your records should be structured
• How defensible your claim is under review

A common issue arises when businesses describe commercial challenges, product features, or routine engineering work as Core R&D.

To qualify, you must be able to demonstrate that:

• A competent professional could not determine the outcome using existing publicly available knowledge
• There was a genuine technical uncertainty
• A structured process of experimentation was undertaken to resolve it

If the work could be solved using standard practices, documentation, or known solutions, it is unlikely to qualify as Core R&D.

3. How It Works in Synnch

In Synnch, Core R&D activities are structured within the Projects module.

When setting up a project, you should:

1. Define the overall technical objective.
2. Identify specific Core activities that involve experimentation.
3. Clearly describe:
   • What was technically uncertain
   • Why the outcome could not be known in advance
   • How the team tested possible solutions
   • What knowledge gap the experimentation aimed to resolve

Core activities act as the anchor for:

• Supporting activities
• Timesheet allocations
• Linked evidence
• Associated R&D expenditure

Each Core activity should clearly show:

• The technical problem
• The experimentation undertaken
• The technical findings

If you engage a consultant, they may assist in structuring this information. However, the technical detail must originate from your internal team.

4. Practical Example

A software company is developing a new real-time optimisation engine that must process large volumes of data within strict latency limits.

The uncertainty is whether a proposed architecture can meet the required performance thresholds without compromising accuracy.

The team:

• Develops multiple algorithm approaches
• Builds and tests prototypes
• Benchmarks system performance
• Iterates based on results

At the outset, it was not known whether the required performance could be achieved. The experimentation generates new technical knowledge about system limitations and performance behaviour.

This experimental work may qualify as a Core R&D activity.

5. Common Mistakes

• Describing commercial goals instead of technical uncertainties
• Claiming routine configuration or integration work as Core R&D
• Failing to document the experimentation process
• Confusing “new to the company” with “new technical knowledge”
• Treating Supporting activities as Core activities