Understanding the distinction between R&D core activities and R&D supporting activities is fundamental to successfully claiming the R&D Tax Incentive in Australia. These two categories form the foundation of R&D eligibility, with different requirements and tests applying to each. Whilst R&D core activities must meet strict experimental criteria and involve genuine technical uncertainty, R&D supporting activities have different requirements focused on their relationship to and purpose in enabling the core R&D work.
The distinction between R&D core activities and R&D supporting activities significantly impacts what you can claim, how you describe activities in your registration, and how regulators assess your eligibility. Misunderstanding this distinction is a common reason claims are reduced or rejected, with businesses either failing to claim eligible supporting activities (leaving money on the table) or claiming ineligible core activities as supporting work (risking regulatory challenges).
This comprehensive guide explains exactly what constitutes R&D core activities, Future Core Activities,core technology, and R&D supporting activities, the different tests and requirements for each, how to identify and distinguish them in your business, and how to structure your R&D Tax Incentive claims to maximise benefits whilst maintaining robust compliance.
Understanding R&D Core Activities
R&D core activities are the experimental activities at the heart of your R&D Tax Incentive claim. These activities must meet the strict legislative definition of R&D and are subject to three key tests that determine eligibility.
What Are R&D Core Activities?
R&D core activities are defined in the legislation as experimental activities conducted for the purpose of generating new knowledge, where the outcome cannot be known or determined in advance by a competent professional in the field — including Future Core Activities that are expected to involve similaruncertainty and development of underlying core technology.
experimentation and uncertainty as your projects evolve.
Key characteristics of R&D core activities:
Experimental nature: Core activities must involve experimentation – testing hypotheses, conducting trials, making observations, and drawing conclusions based on results.
Technical focus: The experimentation must address technical problems or challenges, not commercial, market, or business questions.
Knowledge generation: The purpose must be generating new knowledge, whether that’s developing new products, processes, services, devices, or materials, or improving existing ones.
Uncertainty resolution: Core activities must resolve technical uncertainties through systematic experimental approaches.
Understanding these characteristics is essential for identifying R&D core activities in your business.
The Three Legislative Tests for R&D Core Activities
R&D core activities must satisfy three legislative tests. All three tests must be met – satisfying only one or two is insufficient for eligibility.
Test 1: Technical Uncertainty
The first test for R&D core activities requires that you’re attempting to overcome a technical problem or challenge where the outcome cannot be known or determined in advance by a competent professional in the field.
What constitutes technical uncertainty:
Unknown outcomes: You don’t know whether your approach will work or what results you’ll obtain until you conduct experiments.
Knowledge gaps: The information you need doesn’t exist in publicly available sources, established methods, or existing expertise.
Genuine experimentation required: You must conduct experiments to determine the outcome – it cannot be resolved through research, consultation, or applying established methods.
What is NOT technical uncertainty:
Predictable outcomes: If a competent professional could determine the outcome in advance, there’s no technical uncertainty.
Implementation challenges: Difficulty implementing known solutions doesn’t create technical uncertainty.
Business or market uncertainty: Uncertainty about commercial viability, customer acceptance, or market demand doesn’t qualify.
Test 2: Systematic Progression of Work
The second test for R&D core activities requires following a systematic progression of work based on principles of established science. This is often referred to as following the scientific method.
Elements of systematic progression:
Hypothesis formulation: Clearly stating what technical question you’re attempting to answer or what hypothesis you’re testing.
Experimental design: Planning experiments or investigations to test your hypothesis systematically.
Controlled execution: Conducting experiments in a planned, controlled manner following scientific principles.
Observation and recording: Systematically observing and recording results, data, and observations.
Analysis and conclusions: Analysing results and drawing logical conclusions based on evidence.
Iterative refinement: Using conclusions to inform further experiments or final outcomes.
This systematic approach distinguishes R&D core activities from ad hoc problem-solving or trial-and-error development.
Test 3: Purpose of Generating New Knowledge
The third test for R&D core activities requires that the purpose of your activity is to generate new knowledge. This could mean developing new products, processes, services, devices, or materials, or creating improved versions of existing ones.
What qualifies as generating new knowledge:
Novel development: Creating something genuinely new that doesn’t currently exist.
Innovative improvement: Significantly improving existing products, processes, or technologies in ways that involve technical uncertainty.
New applications: Applying technologies in new ways that require overcoming technical uncertainties.
Process innovation: Developing new manufacturing, production, or operational processes with uncertain outcomes.
The “new knowledge” doesn’t need to be new to the world – it needs to be new to your business and require genuine experimentation to acquire.
Examples of R&D Core Activities
Understanding concrete examples helps identify R&D core activities in your business.
Software development examples:
Eligible core activities:
- Developing new algorithms with uncertain performance characteristics
- Creating novel machine learning models where optimal approaches are unknown
- Building new software architectures to solve unprecedented technical problems
- Developing new data processing techniques with uncertain outcomes
Ineligible activities:
- Routine bug fixes using established debugging methods
- Implementing well-documented APIs or frameworks
- Standard user interface design without technical innovation
- Routine software updates using known approaches
Manufacturing examples:
Eligible core activities:
- Developing new manufacturing processes with uncertain outcomes
- Experimenting with new materials or material combinations
- Improving product performance through experimental approaches
- Solving unprecedented technical production problems
Ineligible activities:
- Routine quality control testing
- Scaling up production using established methods
- Cosmetic product changes without technical innovation
- Standard maintenance or troubleshooting
Biotechnology examples:
Eligible core activities:
- Developing new drugs or therapies with uncertain efficacy
- Conducting experiments to understand biological mechanisms
- Developing new diagnostic methods with uncertain performance
- Experimenting with new formulations or delivery methods
Ineligible activities:
- Routine clinical trials following established protocols
- Standard quality control testing
- Routine production or manufacturing
- Regulatory compliance work
Understanding R&D Supporting Activities
R&D supporting activities are work undertaken for the dominant purpose of supporting your core R&D activities. These activities have different eligibility requirements than core activities and play a crucial role in maximising your R&D Tax Incentive claim, while helping you clearly distinguish them from ineligible core activities.
What Are R&D Supporting Activities?
R&D supporting activities are defined as activities undertaken for the dominant purpose of supporting one or more core R&D activities. These activities don’t need to be experimental themselves, but they must directly relate to and enable your core R&D work while ensuring they are clearly distinguished from ineligible core activities.
Key characteristics of R&D supporting activities:
Supporting purpose: The activity must be undertaken primarily to support core R&D, not for other business purposes.
Direct relationship: The activity must have a clear, direct relationship to specific core R&D activities.
Enabling function: The activity must enable or facilitate the core R&D work in a meaningful way.
Not independently R&D: Supporting activities don’t need to meet the three tests for core activities – they qualify based on their relationship to core R&D.
Understanding these characteristics is essential for identifying R&D supporting activities in your business.
The Dominant Purpose Test
The key test for R&D supporting activities is the “dominant purpose” test – the activity must be undertaken for the dominant purpose of supporting your core R&D activities.
What “dominant purpose” means:
Primary reason: The main or principal reason for undertaking the activity must be to support core R&D.
More than 50%: If an activity serves multiple purposes, more than 50% of the purpose must be supporting core R&D.
At the time of activity: The purpose is assessed at the time the activity is undertaken, not retrospectively.
Objective assessment: The purpose is assessed objectively based on the circumstances, not just your stated intention.
What dominant purpose is NOT:
Incidental benefit: If an activity incidentally benefits R&D but is primarily undertaken for other reasons, it doesn’t qualify.
Retrospective justification: You cannot retrospectively claim that an activity undertaken for other purposes was actually for supporting R&D.
Minor purpose: If supporting R&D is a minor or secondary purpose, the activity doesn’t qualify.
Understanding the dominant purpose test is crucial for correctly identifying R&D supporting activities.
Direct Relationship Requirement
Beyond dominant purpose, R&D supporting activities must have a direct relationship to your core R&D activities. Indirect or tangential relationships are insufficient.
What constitutes a direct relationship:
Clear linkage: You can clearly explain how the supporting activity relates to and enables specific core R&D activities.
Necessary for R&D: The supporting activity is necessary for conducting the core R&D work effectively.
R&D-specific: The activity is specific to the R&D project, not general business activities that happen to benefit R&D.
Contemporaneous: The supporting activity occurs during the same period as the related core R&D work.
What is NOT a direct relationship:
General business activities: Activities that benefit the business generally, including R&D incidentally.
Indirect benefits: Activities that indirectly support R&D through multiple degrees of separation.
Retrospective connections: Claiming connections between activities and R&D that weren’t apparent at the time.
Examples of R&D Supporting Activities
Understanding concrete examples helps identify R&D supporting activities in your business.
Common supporting activities:
Prototype fabrication:
- Building prototypes or test equipment specifically for R&D experiments
- Creating test rigs or experimental setups
- Fabricating samples for testing and evaluation
Data collection and analysis:
- Collecting data required for R&D experiments
- Analysing experimental results
- Processing and interpreting R&D data
Testing and trials:
- Conducting tests that support experimental work
- Running trials to gather data for R&D projects
- Performance testing of R&D prototypes
Project management:
- Managing R&D projects and coordinating research activities
- Planning and scheduling R&D experiments
- Coordinating between R&D team members
Literature review and research:
- Conducting technical research to inform R&D approaches
- Reviewing scientific literature relevant to R&D projects
- Investigating existing technologies or methods
Technical documentation:
- Documenting R&D experiments, observations, and results
- Preparing technical reports on R&D findings
- Recording R&D methodologies and outcomes
What is NOT supporting R&D:
Production activities: Manufacturing products, even if they use R&D-developed processes and core technology
Marketing and sales: Promoting or selling products, even if they’re R&D-developed
General administration: Standard business administration that incidentally benefits R&D
Commercial activities: Market research, customer testing, or business development, even when they relate to your underlying core technology
Key Differences Between Core and Supporting R&D Activities
Understanding the key differences between R&D core activities and R&D supporting activities ensures you correctly categorise activities in your claims.
Eligibility Tests
The most fundamental difference is the eligibility tests that apply to each category.
R&D core activities requirements:
Must meet all three legislative tests:
1.Technical uncertainty
2.Systematic progression of work
3.Purpose of generating new knowledge
Must be experimental: Core activities must involve genuine experimentation with uncertain outcomes.
Must be technical: Core activities must address technical problems, not commercial or business questions.
R&D supporting activities requirements:
Must meet the dominant purpose test: Activity undertaken primarily to support core R&D.
Must have direct relationship: Clear, direct connection to specific core R&D activities.
Don’t need to be experimental: Supporting activities don’t need to involve experimentation themselves.
Can be non-technical: Some supporting activities (like project management) aren’t inherently technical but still qualify.
Dependency Relationship
Another key difference is the dependency relationship between the two categories.
Core activities can exist independently:
R&D core activities can exist without supporting activities. If you conduct experimental work to resolve technical uncertainties, you have core R&D regardless of whether you have supporting activities.
Supporting activities cannot exist independently:
R&D supporting activities cannot exist without core activities. You cannot claim supporting activities unless you have at least one eligible core R&D activity. If you have no core R&D, you cannot claim supporting activities regardless of what work you’ve done.
Practical implication:
You must identify and describe at least one core R&D activity in your registration before you can claim any supporting activities. The supporting activities must then be clearly linked to the core activities you’ve described.
Documentation Requirements
The documentation requirements differ between R&D core activities and R&D supporting activities.
Core activities documentation:
Must demonstrate:
- Technical uncertainties faced
- Hypotheses tested or technical questions addressed
- Experimental approaches and methodologies
- Observations and results obtained
- Conclusions and new knowledge generated
- Systematic progression of work
Supporting activities documentation:
Must demonstrate:
- What the supporting activity involved
- Which core R&D activity it supported
- How it enabled or facilitated the core R&D
- Why the dominant purpose was supporting R&D
- The direct relationship to core activities
Registration Description Requirements
The way you describe activities in your AusIndustry registration differs between core and supporting categories.
Core activity descriptions must include:
Technical objectives: What you were attempting to achieve technically Technical uncertainties: What technical problems you faced and why outcomes were uncertain Hypotheses: What technical questions you were attempting to answer Experimental approach: How you systematically conducted experiments Results and knowledge: What you learned through the R&D work
Supporting activity descriptions must include:
Activity description: What the supporting activity involved Related core activity: Which specific core R&D activity it supported Relationship explanation: How it directly enabled or facilitated the core R&D Dominant purpose justification: Why the primary purpose was supporting R&D Necessity explanation: Why the activity was necessary for the core R&D work
How to Identify Core and Supporting Activities in Your Business
Successfully claiming the R&D Tax Incentive requires systematically identifying both R&D core activities and R&D supporting activities in your business operations.
Step 1: Identify Core R&D Activities First
Always begin by identifying R&D core activities – these are the foundation of your claim.
Process for identifying core activities:
Review all development projects: Examine all technical development work conducted during the year.
Apply the three tests: For each project, assess whether it meets all three legislative tests (technical uncertainty, systematic progression, new knowledge generation).
Identify experimental work: Focus on work that involved genuine experimentation with uncertain outcomes.
Document technical challenges: Clearly articulate what technical problems you faced and why outcomes were uncertain.
Separate R&D from routine work: Distinguish experimental development from routine implementation or business-as-usual activities.
Prioritise significant projects: Focus on major R&D projects first, then consider smaller incremental improvements.
Step 2: Identify Supporting Activities
Once you’ve identified R&D core activities, systematically identify R&D supporting activities that enabled that core work.
Process for identifying supporting activities:
Review all project work: For each core R&D project, review all work undertaken during the project.
Apply the dominant purpose test: For each activity, assess whether its dominant purpose was supporting the core R&D.
Verify direct relationships: Ensure each supporting activity has a clear, direct relationship to specific core R&D activities.
Consider all categories: Review all potential supporting activity categories (prototyping, data collection, testing, project management, etc.).
Exclude ineligible activities: Remove activities primarily undertaken for production, commercial, or other non-R&D purposes.
Document relationships: Clearly document how each supporting activity relates to and enables core R&D work.
Step 3: Map Supporting to Core Activities
Create clear mappings between R&D supporting activities and the R&D core activities they support.
Why mapping matters:
Registration requirement: Your AusIndustry registration requires you to explain which core activities each supporting activity relates to.
Demonstrates direct relationship: Clear mapping demonstrates the direct relationship required for supporting activity eligibility.
Facilitates audit defence: If your claim is reviewed, clear mappings help regulators understand and verify relationships.
Ensures completeness: Systematic mapping ensures you don’t overlook eligible supporting activities.
Mapping approach:
For each supporting activity, identify which specific core R&D activity or activities it supported, explain how it enabled or facilitated that core R&D work, and document why the dominant purpose was supporting R&D rather than other purposes.
Common Identification Mistakes
Understanding common mistakes helps you correctly identify R&D core activities and R&D supporting activities.
Common core activity mistakes:
Claiming routine work: Describing business-as-usual development as if it were experimental R&D.
Overstating uncertainty: Claiming technical uncertainty where outcomes were actually predictable.
Insufficient experimentation: Claiming activities that didn’t involve genuine systematic experimentation.
Commercial focus: Describing commercial or business objectives rather than technical knowledge generation.
Common supporting activity mistakes:
No core activity: Claiming supporting activities without any eligible core R&D activities.
Weak relationships: Claiming indirect or tangential relationships between supporting and core activities.
Wrong dominant purpose: Claiming activities primarily undertaken for production, commercial, or other non-R&D purposes.
Production activities: Claiming routine production or manufacturing as supporting activities.
Maximising Your R&D Tax Incentive with Bulletpoint
Successfully identifying and claiming both R&D core activities and R&D supporting activities requires expertise in applying the legislative tests and understanding regulatory expectations. At Bulletpoint, we help Australian businesses maximise their R&D Tax Incentive claims by comprehensively identifying all eligible activities in both categories.
Our Comprehensive Activity Identification Process
We conduct systematic reviews to identify all R&D core activities and R&D supporting activities in your business.
Our process includes:
Technical interviews: We interview your R&D staff to understand all technical development work conducted during the year.
Project reviews: We review all R&D projects, examining technical documentation, experimental records, and outcomes.
Core activity assessment: We apply the three legislative tests to identify all eligible core R&D activities.
Supporting activity identification: We systematically identify all work undertaken for the dominant purpose of supporting core R&D.
Relationship mapping: We create clear mappings between supporting and core activities, documenting direct relationships.
Activity descriptions: We prepare comprehensive, technically accurate descriptions of both core and supporting activities for your registration.
Documentation compilation: We help you compile documentation that demonstrates eligibility for both activity categories.
Our Track Record
With over $100 million in R&D claims lodged and a 4.8-star rating from 250+ Google reviews, Bulletpoint has extensive experience identifying and claiming both R&D core activities and R&D supporting activities across all industries.
Our clients consistently report that our systematic approach identifies eligible activities they would have overlooked, maximising their R&D Tax Incentive benefits whilst maintaining robust compliance.
Get Started Today
Don’t leave money on the table by overlooking eligible R&D supporting activities, or risk claim rejection by incorrectly categorising activities. Professional support ensures you correctly identify and claim all eligible activities in both categories — including current and Future Core Activities that may become central to your innovation roadmap.
Contact Bulletpoint today to discuss how we can help you maximise your R&D Tax Incentive claim by comprehensively identifying all eligible core, Future Core Activities, and supporting R&D activities in your business.
Disclaimer: This article provides general information only and does not constitute professional advice. You should consult with a qualified R&D tax consultant to discuss your specific circumstances. The R&D Tax Incentive legislation and administrative practices are subject to change.
