How to conduct eligible R&D activities for the R&D Tax Incentive

Your systematic progression of work must include all of the following elements:

• Hypothesis
• Experiment(s)
• Observation
• Evaluation
• Logical conclusions

You may conduct one or more elements of your systematic progression over several years.

We expect you to keep evidence to show when and how your activities proceed from one element to the next.

We understand that your R&D may not proceed according to your plan. So you should keep records to show your intent to conduct all elements of your systematic progression of work. While the R&DTI is a self-assessment program, we may review your application. If we do, we'll review your systematic progression of work as a whole.

Your hypothesis is your idea or proposed explanation for how you could achieve a particular result. It also includes why that result may be or may not be achievable.

You may express your hypothesis in a single statement or in several statements. You should set out what you plan to do and why.

We expect you to explain:

• what result you aim to achieve
• how and why you think you can achieve it, informed by your background research.

We expect to see evidence that shows how your background research helped you develop your hypothesis.

Your hypothesis will guide your investigation. You need to develop it before you start your eligible core R&D activities. You need to be able to test it through experiments you conduct to determine the outcome of your core R&D activities.

An experiment is a scientific procedure that you undertake to test your hypothesis, observe what happens and compare this to what you expect. You may also compare your results to those from previous experiments. We expect you to explain how you conduct or plan to conduct your experiment. For example, you might describe the parameters you vary, those you hold constant, and those you observe or measure.

What you observe and evaluate in your experiment may support your hypothesis, or it may not. That is, you may get the result you expect, or you may get a different result. Either way, your R&D activities may still be eligible for the R&DTI.

You may group a series of experiments in one core R&D activity if each aims to test the same technical or scientific idea.

Experiments can take place in many environments. These may include laboratories, process plants, offices or farms. Experiments in these different environments can also take different forms. The details and design of experiments may vary between industries and organisations. However, they must aim to test a hypothesis as part of a systematic progression of work.

Observation is where you observe, measure and record information and results that relate to your experiment.

Such information can be:

• qualitative which is descriptive
• quantitative which is numerical data.

Evaluation is where you assess and analyse the results of your experiments. You need to consider what the results of your experiments mean.

We expect your records to show that you evaluate the results of your experiments. The evaluation should show that you understand why and how you achieve or do not achieve your desired outcome. You should analyse how or why something occurs and explain your insights through description. We expect you to analyse numerical data using established techniques.

We also expect you to evaluate causal relationships between the parameters you vary, hold constant and measure in your experiment.

The final part of the systematic progression of work is to draw logical conclusions about your hypothesis.

When you test your hypothesis through an experiment, your results may support your theory about how to achieve your desired outcome or they may not.

You need to form logical conclusions about why your results support your hypothesis or not. Your logical conclusion may be that you need to investigate different solutions and test a new hypothesis.

You could then test this new hypothesis through new experiments. Your new experiments may be similar enough to include as part of the same core R&D activity. Or, they may be different and need to be part of a new core R&D activity.