Royal Wins Pty Ltd and Innovation and Science Australia

The Administrative Appeals Tribunal reviewed a decision by Innovation and Science Australia (the Respondent) concerning the eligibility of research and development (R&D) activities undertaken by Royal Wins Pty Ltd (the Applicant) for tax incentives. The Applicant sought registration for R&D activities related to the development of a hybrid gaming platform, specifically focusing on integrating gaming algorithms. The Respondent had initially refused to register these activities as either Core or Supporting R&D activities under Division 355 of the *Income Tax Assessment Act 1997* (Cth) for the 2015/16 and 2016/17 financial years.

The central legal issues before the Tribunal were whether the Applicant's claimed activities constituted Core R&D activities or Supporting R&D activities as defined by the *Income Tax Assessment Act 1997* (Cth). Specifically, the Tribunal had to determine if the activities involved experimental work whose outcomes could not be known or determined in advance based on current knowledge, and if they proceeded through a systematic progression of work from hypothesis to experiment, observation, and evaluation, leading to logical conclusions. The Tribunal also considered whether the activities were conducted for the purpose of generating new knowledge or information.

The Tribunal reasoned that a critical deficiency in the Applicant's case was the inadequate contemporaneous documentation. While the Applicant presented simulations, the lack of inline documentation within Python scripts and Excel worksheets, and the absence of clear records detailing hypotheses, experimentation, and results, prevented a full understanding of the work undertaken. The Tribunal accepted the Respondent's submission that adequate documentary evidence is essential for demonstrating a systematic progression of work, which is a requirement for R&D activities. The Tribunal found that the provided documentation did not sufficiently evidence the application of a scientific method in a systematic progression from hypothesis to experiment, observation, and evaluation, leading to logical conclusions.

Consequently, the Tribunal affirmed the Respondent's decision. The Applicant's appeal was dismissed, and the R&D activities in question were not registered as eligible for the R&D tax incentive scheme.