When claiming expenses as a core activity for the R&D Tax Incentive, AusIndustry requires businesses to show examples of their experimental work. Demonstrating that the work follows the scientific method (another requirement for the R&D Tax Incentive) starts with a testable hypothesis.

What is a testable hypothesis? This is a question some businesses find difficult to answer.

A hypothesis is different to an aim or a goal. These often describe the reasons for test work, or the final desired outcome of the tests. The hypothesis is a single idea that can be proven true or false by running a test. It typically includes an action and an expectation – “if I do or change this, then the result will be this”.

The type of test will vary depending on whether a product, process or service is being tested. It could involve running a new software program to see if it gives the expected outputs, or seeing if a new cleaning agent cleans as well or as fast as predicted.

Running the experiment will show whether the expectation in the hypothesis was achieved or not. Remember, AusIndustry is also interested in examples where the hypothesis was proven wrong – failed experiments illustrate the technical risk in a company’s R&D activities.