RBPK and Innovation and Science Australia

The case involved an application by a large commercial organisation (the applicant) seeking review of a decision by Innovation and Science Australia (the respondent) which found that certain digital transformation activities undertaken by the applicant between 2008 and 2013 were not core or supporting research and development activities for the purposes of the Income Tax Assessment Act 1997 (Cth). The applicant claimed these activities qualified for significant tax offsets. The respondent had issued a certificate under s 27J of the Industry Research and Development Act 1986 (Cth) affirming its findings, which was subsequently affirmed on internal review. The applicant sought review of this decision in the Administrative Appeals Tribunal.

The primary legal issue before the Tribunal was whether to grant the applicant's request for a split hearing. The applicant submitted that a two-stage hearing process would lead to economies, with the first stage informing the approach to the second. The respondent opposed this, and the application for a split hearing was made before all evidence had been filed. The Tribunal was required to determine if the application for a split hearing was premature and, if so, what directions were appropriate to manage the case.

The Tribunal determined that it was premature to grant the applicant's request for a split hearing. Instead, the Tribunal proposed a pragmatic course of action to keep the option of a split hearing open while allowing for better assessment of its desirability. This involved prioritising the preparation of evidence in relation to two specific claimed activities, allowing the respondent time to consider this material and prepare its own submissions. The parties were directed to engage in a dispute resolution process to attempt to reach an agreement on future directions, which would then be considered at a further case management hearing. The Tribunal also tentatively set aside hearing dates in December 2018 and February 2019 to accommodate a ten-day hearing should a split hearing be agreed upon or directed later. The Tribunal was satisfied that this approach would not cause inconvenience, additional cost, or further delay, as the evidence and arguments concerning the two claimed activities would need to be prepared regardless.