Coal of Queensland Pty Ltd and Innovation and Science Australia (Taxation)

This matter concerned an appeal by Coal of Queensland Pty Ltd against decisions made by Innovation and Science Australia (ISA) regarding research and development (R&D) tax offsets. The dispute involved whether certain activities undertaken by Coal of Queensland qualified as "core R&D activities" or "supporting R&D activities" under Division 355 of the *Income Tax Assessment Act 1997* (Cth) and the *Industry Research and Development Act 1986* (Cth). A secondary issue arose concerning an application for an extension of time to seek an internal review of an ISA decision. The case was heard by Deputy President Bernard J McCabe.

The court was required to determine two primary legal issues. Firstly, whether the activities conducted by Coal of Queensland, specifically those relating to the production of a viable coking coal product, constituted "core R&D activities" or "supporting R&D activities" as defined by the relevant legislation. This involved considering whether these activities fell within an exception for prospecting, exploring, or drilling minerals for the purpose of determining the size or quality of deposits. Secondly, the court had to consider whether an overseas activity related to the design of a wash-plant beneficiation process met the conditions in section 28D of the *Industry Research and Development Act 1986* (Cth) and whether the applicant should be granted a further period to make an application for internal review of that decision, pursuant to section 30C(3)(b) of the same Act.

In relation to the R&D tax offset claim, the court found that the activities undertaken, including seismic surveys, drilling to validate survey results, and subsequent analysis, fell within the exception provided by section 355-25(2)(b) of the *Income Tax Assessment Act 1997* (Cth). Consequently, these activities were not considered "core R&D activities." Regarding the application for an extension of time, the court determined that the applicant's failure to apply for an internal review within the statutory timeframe was due to its own fault and was within its control. The court applied principles from Part 3 of the *Industry Research and Development Decision Making Principles 2011*, specifically sections 3.2, 3.3, and 3.5, which govern the granting of extensions of time and require that the need for the extension was not the fault of the interested person and was not within their control.

The court affirmed the decisions under review. This meant that the R&D tax offset claims for the activities in question were not allowed as core R&D activities, and the application for an extension of time to seek an internal review was refused.