The Moreton Resources Case - R&D tax incentive in Australia

The Moreton Resources Case – Finally certainty amongst the uncertainty for the R&D tax incentive in Australia, but only if you know how to find it.  

The morning of Thursday, 25 July 2019 became a significant day for the R&D tax incentive in Australia, as the landmark decision of Moreton Resources Ltd v Innovation and Science Australia [2019] FCAFC 120 (“Moreton”) was handed down by the Full Bench of the Federal Court. The Moreton judgement became the first judicially binding precedent in relation to the meaning of “eligible R&D activities” contained within Division 355 of the Income Tax Assessment Act 1997 (“Cth”) (“ITAA 1997”) and indeed, the first in relation to the R&D tax incentive legislation. The decision provided a departure from the manner in which some of the concepts were being applied within industry and by the AAT prior to this matter. Further, critically as this is a decision of the Full Federal Court and Innovation and Science Australia (ISA) did not appeal for special leave in the High Court, generally speaking, this is the final court of appeal in taxation matters and therefore giving weight to the precedent value of the principles outlined by the Court. Following the Federal Court’s judgment, ISA acknowledged in its response that activities involving the application of existing technology at a new site may, depending on the particular facts and circumstances of each case, satisfy the legislative criteria.

On the day of release, RSM Australia was one of the first firms to discuss the case and share our preliminary views on the significant impact of the decision. This publication will seek to dig deeper to address some of these critical issues to provide the full context regarding what this decision really means, including the positions adopted in prior Administrative Appeals Tribunal (“AAT”) decisions.