Few activities sit so squarely on both sides of the law. Section 355-25(2)(f) excludes from core R&D activities associated with complying with statutory requirements or standards, and lists among them the routine testing and analysis of materials, components, products, processes, soils and atmospheres. Yet testing is how almost every physical experiment observes its result. Whether a given test run is one or the other depends on why it was run.
The deciding question: was the result known?
A test is part of a core activity when it measures something a competent materials scientist or engineer could not predict, for a new material, formulation, geometry or process, as part of a designed experiment. It is routine when it confirms an expected result: that a product meets its specification, that a batch matches the last one, that a supplier's material is what was ordered. That kind of testing fails the core test on its own terms, whatever the reason it was run. The s 355-25(2)(f) exclusion is a second barrier, for testing done to meet a requirement in law or a standard.
Two clarifications prevent most errors.
- A standard method is not a routine purpose. Salt spray hours, tensile strength or slow crack growth measured with a published standard method can be the observation step of an experiment. The standard is the measuring stick. What matters is whether the result for this material was unknown.
- Regulation does not decide it either. AusIndustry says activities are not excluded just because they must be conducted in a regulated manner. Testing undertaken to show compliance with a standard is excluded; an experiment that happens to use an accredited laboratory is not.
Where routine testing can still count
Routine testing is not core, but AusIndustry confirms it can be a supporting activity: where products are tested so they can be used in core R&D, that testing can support the core activity. Checking the purity of a raw material before it enters an experimental formulation is an example. It must be directly related to the experiment. Where the testing falls within an exclusion, produces goods or services, or is directly related to producing goods or services (testing that also serves commercial production, for example), it must also pass the dominant purpose test (s 355-30(2)).
Characterisation done as a matter of course is a common grey area. AusIndustry's biotechnology guide lists product characterisation and quality testing as routine. Characterisation that is the measurement in a designed experiment belongs to the core activity; characterisation of every product shipped does not.
Shared laboratories and shared staff
The same technicians and instruments usually run both kinds of test. The claim then rests on records made run by run: a work order or notebook entry that says which experiment a sample belongs to, or that it is QC. Instrument time, consumables and staff hours are apportioned on those records, and a laboratory that only logs results, not purposes, leaves the split to guesswork.
Testing outside the laboratory routine
- Developing a test method can be core where its feasibility is genuinely uncertain.
- Failure analysis is routine unless it uncovers an unknown mechanism that the company then tests by experiment.
- Testing overseas at a facility not available in Australia needs an overseas finding applied for before the end of the income year in which it is conducted.
Testing linked to process scale is covered on manufacturing scale-up, testing of prototype parts on prototypes and tooling, and laboratory assays for human samples on diagnostics and IVD development. The excluded categories are listed under excluded activities.