Ausindustry provides a guide to this question, including:

1.    An experiment or a set of experiments need to take place. The experiment or test is designed to investigate something unknown.  Or the effect of something previously not attempted.

2.    The outcomes of the experiments could not have already be known or determined in advance on current knowledge. 3.    A scientific method must be used.

4.    The activity must be undertaken for the purpose of generating new knowledge.

5.    The core R & D activity must not appear on the exclusion list. The above is summarised in Tax Laws Amendment (Research and Development) Act 2001.

Refer - http://mcnamaraandco.com/news/2013/02/what-is-the-research-and-development-tax-incentive-concession/