Market Research as an Eligible R&D Activity
Market research par say is excluded from the R&D Tax Benefits program as a ‘core’ R&D activity. To illustrate, the following is a quotation from the Senate Economics Legislation Committee that considered the proposed amendment to the Act (now Law):
“5.39 Excluded activities are identified in subsection 355-25(2) and include:
(a) market research, market testing or market development, or sales promotion (including consumer surveys);”
and from the Explanatory Memorandum to the Bill 2010:
“2.31 Other activities continue to be excluded on the basis that they would not satisfy the core R&D definition due to them normally not occurring as part of an experiment. These include market research, market testing and market development activities; the undertaking of management studies or efficiency surveys; and activities related to the commercial, legal and administrative aspects of patenting and licensing.”
However, under the right circumstances, market research may be an eligible supporting R&D activity.
Quoting again from the Explanatory Memorandum to the Bill 2010:
“2.32 An activity undertaken by an R&D entity that is excluded from being core R&D can still qualify as a supporting R&D activity if it is undertaken for the dominant purpose of supporting core R&D. [Schedule 1, item 1, paragraph 355-30(2)(a)]”
On the basis of these quotations, and discussions with AusIndustry, we believe that market research may be an eligible supporting R&D activity where it is undertaken primarily to determine the direction of future R&D activity.