How This Works in Practice

Let’s say you’re developing a new AI model to detect fraudulent transactions.

Future Core R&D Activity (Not Eligible Yet)

• You brainstorm how to improve fraud detection.
• You research existing fraud detection methods.
• You design an AI model and plan how to test it.

Eligible Core R&D Activity (Now Claimable Under the R&D Tax Incentive)

• You train the AI model and test its accuracy.
• You run experiments comparing different algorithms.
• You document results to see what worked and what didn’t.

“The exact moment it becomes eligible? When you stop planning and start testing.”

For more real-world examples, read: What is a Core R&D Activity?

Why This Matters – Don’t Wait Until You’re Being Audited

This is where most businesses get caught out. They assume their work is eligible, make an R&D Tax Incentive claim, and then years later, during an AusIndustry audit, they find out they never actually met the eligibility criteria.

The ATO and AusIndustry don’t assess your claim based on what you did—they assess it based on what you wrote in your R&D documentation. If your records don’t prove systematic experimentation, your claim can be rejected.

Why Work With Bulletpoint?

Getting your R&D Tax Incentive claim right isn’t just about knowing what qualifies—it’s about proving it in a way that withstands scrutiny. The biggest mistake businesses make is assuming their work is eligible when it’s still in the future core stage. By the time they realise, it’s too late, and they’re facing an AusIndustry or ATO review with no way to fix their claim.

This is where Bulletpoint makes the difference.

We’ve been in the game for over 10 years, successfully lodging 500+ R&D Tax Incentive applications. More importantly, we’ve been through countless AusIndustry and ATO reviews, so we know exactly what they look for. We don’t just write claims—we write claims that can withstand audits.

With over 280 Google reviews and a 4.8-star rating, we’re Australia’s highest-rated R&D tax consultant. Businesses trust us because we cut through the jargon, focus on what actually qualifies, and ensure your claim is bulletproof.

If you want to be confident that your R&D claim is legitimate, defendable, and maximised, let’s talk.

• Book a call now and get it right from the start.
• Read our Google reviews and see why businesses choose us.

Case Study: When Does AI & Algorithm Development Become an Eligible R&D Activity?

Many businesses developing AI models assume their work qualifies for the R&D Tax Incentive from day one. But unless there’s a systematic progression of work with an unknown outcome, it might still be in the future core R&D stage.

Here’s a realistic AI case study that highlights exactly when the work clicks over from planning to eligible R&D—and where companies often get caught out.

The Idea Phase – Not Eligible (Future Core R&D Activity)

A fintech company wants to develop an AI-powered fraud detection system that detects fraudulent transactions more accurately than existing methods.

They start by researching fraud detection techniques, reviewing academic papers, and analysing competitor solutions. Their data science team designs an AI model, selecting machine learning algorithms they believe will work best.

At this stage, no testing has occurred—they are still in the planning and feasibility stage.

Why is this not yet an eligible R&D activity?

• No hypothesis is being tested.
• No experiments or systematic testing have started.
• The company is only gathering knowledge, not generating new knowledge.

At this point, the work is a future core R&D activity—it might qualify once systematic testing begins.

Developing Systems for Data Capture – Not Yet Eligible (Future Core, But Essential for R&D)

Before they can test the AI model, they need systems to collect and structure the data required for training the algorithm. The company builds:

• Data pipelines to extract transactional data from banking systems.
• Anomaly detection filters to label potential fraudulent transactions.
• A secure testing environment to trial the AI without compromising live customer data.

Why is this not yet eligible for the R&D Tax Incentive?

• The company is setting up infrastructure, not testing an unknown.
• They are preparing for R&D, not conducting it.
• The work is essential for R&D but is considered business development rather than experimental research.

This phase is where many companies mistakenly claim too early. Setting up data infrastructure is necessary, but eligibility only starts when the AI model itself is being tested with an unknown outcome.

Testing the AI Model – Now Eligible (Core R&D Activity Begins)

With the data capture systems in place, the company starts training its AI model.

They develop a hypothesis: “Can our AI model detect fraud with 20% greater accuracy than traditional rule-based systems?”

To test this, they:

• Train the AI model on historical transaction data.
• Compare multiple machine learning algorithms to see which performs best.
• Measure false positives and false negatives to refine the model.

Each time the AI model fails to meet performance benchmarks, they adjust its architecture, tweak variables, and repeat the process.

Why is this now an eligible core R&D activity?

• A hypothesis is being tested with unknown outcomes.
• There is systematic experimentation—trial, test, refine.
• The company is solving a technical uncertainty—it’s not routine software development.
• Every step is documented—hypotheses, tests, results, and refinements.

At this point, the activity clicks over to being eligible for the R&D Tax Incentive.

Reviewing Progress with an R&D Consultant – Ensuring Compliance

Before lodging an R&D claim, the company consults an R&D tax specialist (like Bulletpoint) to assess whether their work meets the ATO and AusIndustry’s criteria.

An R&D consultant reviews:

• Whether a clear hypothesis has been tested.
• Whether the AI model development involved technical uncertainty.
• Whether there is sufficient documentation to support the claim.

The company also arranges for an AusIndustry pre-lodgement review, ensuring their project meets compliance standards before submitting their claim.

This step significantly reduces audit risk—ensuring that, if questioned, they have strong evidence to back up their claim.

Refining the AI Model – Still Eligible (Core R&D Continues)

Despite improvements, the AI model still struggles with false positives. The team experiments with:

• New data sets to improve training.
• Alternative AI architectures to enhance accuracy.
• Feature engineering techniques to refine how transactions are classified.

Even though some tests fail, they document every experiment and iteration.

Why is this still eligible?

• The company is still resolving a technical uncertainty.
• The AI model has not yet reached a known solution.
• The work remains experimental, not routine implementation.

This phase remains eligible R&D, as long as the company continues systematic testing and documentation.

Final Deployment – Not R&D (Normal Business Activity)

After extensive testing, the AI model achieves its performance targets. The company integrates it into their fraud detection platform, builds a user interface, and rolls it out to customers.

At this stage, the work stops being R&D and becomes routine implementation.

When does R&D stop?

• When the AI model is fully developed, with no remaining technical uncertainties.
• When no further systematic testing or refinement is needed.
• When the remaining work is software deployment, UI/UX design, or maintenance.

These activities are not eligible under the R&D Tax Incentive.

How AusIndustry Assesses R&D Claims

AusIndustry doesn’t assess your R&D claim based on what you did—they assess it based on what you wrote in your application. If you misclassify an activity, your claim can be denied—even if you actually did R&D.

• If you call a future core activity an eligible core activity, your claim can be rejected because you weren’t actually conducting systematic experimentation. Just saying you were testing something doesn’t make it R&D.
• If you describe an activity as a future core but don’t clearly explain how it will become an eligible core, it can also be denied. AusIndustry is cracking down on vague future core descriptions because too many companies use them as a way to claim work that isn’t truly experimental.

Future core activities are being examined more closely because they are often used as a workaround for not doing actual eligible R&D. If your application doesn’t make a clear distinction, you’re at risk.

This is where Bulletpoint ensures your claim is correctly structured before you submit it—so you don’t find out years later, during an audit, that you got it wrong.