Quick answer: Core R&D activities are experimental activities whose outcome cannot be known in advance and that follow a systematic progression of work. Supporting R&D activities are activities directly related to a core activity — and where they are excluded from being core, or produce or directly relate to producing goods or services, they must also be undertaken for the dominant purpose of supporting one. Different buckets, different tests, and you self-assess both.
27 July 2026 — this article describes the current rules. The 2026-27 Federal Budget proposed R&DTI changes for income years starting on or after 1 July 2028; those are proposed, not current law, and we cover them separately in the proposed Budget 2026 measures.
On a typical project, the trials that resolve the technical unknown may represent only part of the overall work. Around them may sit activities such as building the rig or test harness, installing instrumentation, collecting data and documenting results — all of which need to be assessed separately.
The legislation is explicit that “R&D activities are core R&D activities or supporting R&D activities” (s 355-20, Income Tax Assessment Act 1997). The two categories are assessed under different requirements, and some supporting activities are also subject to an additional dominant-purpose test. Treating all project work as core R&D may create eligibility risk, while excluding surrounding activities without assessing them may omit activities that could qualify as supporting R&D. Confirm your position with your registered tax agent.
The Conclusion First: Three Questions, in Order
Run every activity through the same three questions:
1. Does it meet the core test on its own terms, and is it not on the excluded list?
If yes, it may be a core R&D activity.
2. If not core — is it directly related to a core R&D activity you conducted or plan to conduct?
If no, it is out. There is no third bucket.
3. If directly related — does it trip the dominant-purpose trigger?
If the activity is excluded from being core, or produces goods or services, or is directly related to producing goods or services, then it is a supporting R&D activity only if it was undertaken for the dominant purpose of supporting core R&D activities.
Two things follow. An activity cannot qualify as a supporting R&D activity unless it is directly related to at least one core R&D activity that you conduct or plan to conduct. The dominant-purpose test does not apply to every supporting activity; it applies when the activity falls within one of the statutory trigger categories.
Test One: Is It Core?
Section 355-25(1) of the ITAA 1997 defines core R&D activities as experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by a systematic progression of work that is based on principles of established science and proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions — and that are conducted for the purpose of generating new knowledge.
business.gov.au adds the gloss that matters: that first limb is assessed against what a competent professional could determine from knowledge, information or experience publicly available or reasonably accessible, anywhere in the world, at the time you start (Conducting core R&D activities). A world test, not an in-house test.
Section 355-25(2) then lists activities that are not core however experimental they feel — market research and market testing, management studies or efficiency surveys, activities associated with complying with statutory requirements or standards, reproduction of a commercial product or process, and software developed for the dominant purpose of internal administration (Excluded R&D activities; see what does not qualify). Landing there does not end the conversation — it moves the activity to the second bucket and attaches a second test.
Test Two: Directly Related — and, Sometimes, Dominant Purpose
Section 355-30(1) is one sentence — "Supporting R&D activities are activities directly related to core R&D activities." Section 355-30(2) adds the trigger: if an activity (a) is referred to in s 355-25(2), or (b) produces goods or services, or (c) is directly related to producing goods or services, "the activity is a supporting R&D activity only if it is undertaken for the dominant purpose of supporting core R&D activities."
Three details are particularly important:
"Directly related" means related to the experiment, not to the project. AusIndustry expects you to identify the specific core activity a supporting activity attaches to and how it relates to the elements of your systematic progression of work — recorded while you conduct the activities, not later. Its examples of work usually not directly related include cleaning equipment you did not use for an experiment (Conducting supporting R&D activities).
Whether an activity "produces goods or services" is a question of fact, and the scope of "services" is wide. Official guidance states that it can include services a business provides to itself, to another entity, or that another entity provides to the business. The following may be useful practical indicators, but they are not separate legal tests and no single indicator is determinative. Factors that may point towards a service include an identifiable output provided to a business unit, customer or governance body, or work scoped and reported as a deliverable in its own right. Factors that may point away include work that forms an inseparable part of conducting and recording the experiment and stops when the experimental activity stops.
Project management may fall on either side depending on the facts. A team lead who sequences trials, books the rig and maintains the test log may be coordinating the experiment. A delivery office operating a wider project-management framework and reporting separately to a steering committee may be providing a service to the wider business. The job title or person performing the work does not determine the result.
Dominant purpose is a weighing exercise, not a label. AusIndustry defines it as "your prevailing or most influential purpose", and asks whether the activity goes beyond what you would have done if you were not conducting the core R&D activity. Likely to satisfy it: work with no purpose but assisting the core activity, items you expect to consume in the experiment, apparatus that exists only for the trials. Unlikely: a good or service you do not use, or anything you would have done anyway.
Decision Table
Activity on a typical build
Likely bucket
What you have to test
The trials that resolve the technical unknown
Core, if it qualifies
s 355-25(1): unknown outcome, systematic progression, new knowledge — and not caught by s 355-25(2)
Literature review used to frame the hypothesis
Supporting, if directly related
Directly related first; then test whether the review produces or directly relates to producing a service
Patent search used to frame the hypothesis
Not core; may be supporting
Directly related + dominant purpose
Test rig built and instrumented solely for the trials
Supporting, if directly related
Directly related + dominant purpose (it produces goods)
Testing run to demonstrate compliance with a statutory requirement or standard
Not core, where the activity is associated with that compliance
s 355-25(2)(f) applies on those facts — so directly related + dominant purpose
Routine in-house QA on a saleable product
Generally not core; may be supporting
Directly related first; then test whether limb (f) or the goods-and-services dominant-purpose test applies
Project management, documentation, internal reporting
Supporting, if directly related
Directly related first; then whether this activity produces a service — coordinating the experiment and serving the wider business go different ways
Illustrative only. Every row is a test, not a verdict — it depends on your facts, and you self-assess.
Two of these deserve a note, because both are places where a shorthand answer is wrong:
The literature review and patent search require different treatment. Where a literature review is an input the team uses to frame its own hypothesis, with no output separable from that hypothesis, the directly-related test generally does the work unless the review produces or directly relates to producing a service. A patent search is excluded from being core as a commercial, legal or administrative IP activity, so it must satisfy both the directly-related and dominant-purpose tests to qualify as supporting R&D. A search aimed at a market question is different again: AusIndustry gives a literature review run to identify a market niche as work usually not directly related, and market research is excluded from core by s 355-25(2)(a).
QA and certification testing. Limb (f) covers activities associated with complying with statutory requirements or standards, so testing run to certify a finished product against a standard will generally sit there. Routine QA driven solely by an internal quality process may fall outside limb (f), depending on the facts. Being outside it does not automatically make the QA activity supporting R&D: it must still be directly related to a core activity, and the dominant-purpose test may apply where it produces a service or relates to producing goods.
A Short Worked Example
Hypothetical illustration only — not a client.
A South Australian fabricator needs to join a thin-walled alloy that distorts unpredictably under the heat its process requires; nothing accessible predicts behaviour at this geometry. The team hypothesises a relationship between pulse profile and distortion, designs a parameter sweep and runs it. That sweep is the candidate core activity, whether or not the hypothesis holds. The jig exists only to run it, produces a good, and faces dominant purpose on strong facts. The literature search produced no deliverable beyond the hypothesis — nothing identifies a service; scoped instead as a freedom-to-operate report for the wider business, a service is in play whoever ran it. The first saleable production run makes goods the business meant to sell anyway, so its dominant purpose looks commercial. What decided each line was how the experiment was scoped — not effort, cost, or who held the pen.
How This Lands on the Registration Form
You register activities with the Department of Industry, Science and Resources through the R&DTI customer portal, within 10 months of the end of your income year (Apply for the R&DTI). Three of the application's rules follow directly from the split:
Core and supporting activities are identified separately — different requirements, so they are not grouped together.
Supporting activities may be grouped only where they are directly related to the same core activity, and grouping is not available for those excluded from being core or involved in producing goods or services — exactly the activities that need an individual dominant-purpose story.
Supporting activities can be conducted before, during or after their core activity, including in a different income year — but you must identify the core activity they attach to, so the experiment has to have been planned, and evidenced as planned, before the supporting year closes.
Which bucket an activity lands in does not change your offset rate — it changes how much expenditure is in the claim. For the rate mechanics, see refundable vs non-refundable offset.
The 2026-27 Budget announced proposed R&DTI changes for income years starting on or after 1 July 2028. They are not current law; see our dedicated Budget update for the proposed measures and their status.
Where an RSP Fits
Ignition Research is a Registered Research Service Provider (RSP000047) at Lot Fourteen in Adelaide. We are not a registered tax agent and we give no tax advice — your claim position and lodgement belong to your own adviser. What we do is upstream: helping define the experimental activity and identify how surrounding work may relate to it. Scoping the trials and recording the relationship from the outset can support the later assessment of whether activities such as the rig, test harness and data collection satisfy the supporting R&D requirements. Attempting to reconstruct that relationship at claim time may provide weaker evidence than contemporaneous records.
RSP-conducted eligible R&D activities can be claimed even where the usual $20,000 R&D expenditure threshold is not met
See Get help from a research service provider. Nothing is waived; the exception in s 355-100(2) ITAA 1997 is narrow. Where total notional deductions are below A$20,000, the offset base is generally limited to qualifying expenditure incurred to a non-associate RSP for services within a field for which it is registered, together with eligible CRC Program contributions. Other in-house amounts do not automatically form part of that below-threshold offset base. Supporting-heavy programmes are where small first-year claims live (see claiming R&D under $20,000).
Important note: Using an RSP does not guarantee eligibility — you still self-assess.
Frequently Asked Questions
Q: What is the difference between core and supporting R&D activities?
A: Core R&D activities are experimental activities whose outcome cannot be known in advance and can only be determined by a systematic progression of work from hypothesis to experiment, observation and evaluation to logical conclusions, conducted to generate new knowledge (s 355-25(1) ITAA 1997). Supporting R&D activities are directly related to core R&D activities (s 355-30(1)), and some also face the dominant-purpose test. You self-assess both.
Q: Can I claim project management, testing or documentation as a supporting R&D activity?
A: Possibly. Each must be directly related to a specific core R&D activity; then you test whether that activity produces goods or services, or is directly related to producing them, because if it does, s 355-30(2) adds the dominant-purpose test. That is a question about the activity on your facts, not about the job title or who performs it: coordinating the experiment and delivering a service the wider business consumes go different ways. Administration you would have done anyway is unlikely to qualify either way.
Q: What is the dominant purpose test for supporting R&D activities?
A: Under s 355-30(2), an activity that is excluded from being core, or that produces goods or services, or is directly related to producing them, is a supporting R&D activity only if it is undertaken for the dominant purpose of supporting core R&D activities. AusIndustry describes that as your prevailing or most influential purpose, and asks whether the activity went beyond what you would have done without the core R&D.
Q: Does a supporting R&D activity need its own hypothesis?
A: No — the systematic progression of work is a requirement of core R&D activities under s 355-25(1). But it must be directly related to a core activity, and AusIndustry expects you to identify how it relates to the elements of that core activity's progression of work, and record that at the time.
Sources & Further Reading
Conducting core R&D activities — business.gov.au
Conducting supporting R&D activities — business.gov.au
Excluded R&D activities — business.gov.au
Apply for the R&D Tax Incentive — business.gov.au (identifying and grouping activities; the deadline)
Get help from a research service provider — business.gov.au
Income Tax Assessment Act 1997 — legislation.gov.au (s 355-20, s 355-25, s 355-30; s 355-100 for the below-threshold RSP rule)
Related: What does not qualify · Claiming R&D under $20,000 · Refundable vs non-refundable offset · Budget 2026 measures
Talk to Ignition Research before you register — an hour spent scoping the experiment beats reclassification after the year has closed. Get in touch.
This article is general information from a Registered Research Service Provider about the R&D Tax Incentive. It is not tax, legal or financial advice; eligibility depends on your circumstances and you should self-assess and seek your own advice.
