Grouping for aggregated turnover purposes

How grouping rules work to determine which tax offset you may be entitled to under the R&D tax incentive.

How to use grouping rules

You use the following grouping rules to work out whether your entity is:

• a research and development (R&D) entity that meets the aggregated turnover threshold to qualify for the refundable tax offset, as this is calculated on a 'group' basis
• controlled by one or more exempt entities, again to see if it qualifies for the refundable tax offset.

Turnover threshold

The rate of tax offset and whether it is refundable depends primarily on an R&D entity's 'aggregated turnover'.

An R&D entity's aggregated turnover is the sum of the annual turnovers of the R&D entity and any entity with which it is either connected or affiliated, ignoring any dealings between those entities.

Connected entity

Your entity is connected with another entity if any of the following applies:

• you control the other entity
• the other entity controls you
• you and the other entity are controlled by the same third entity.

Direct control

Broadly, your entity controls another entity if either of the following applies to your entity, its affiliates or both:

• they own or have the right to acquire the ownership of interests in the other entity that carry between them the right to receive at least 40% of any distribution of  
  • income
  • capital
  • net income of the partnership if the other entity is a partnership
   
• if the other entity is a company, they own or have the right to acquire the ownership of interests in the company with at least 40% of the voting power in the company.

We can decide that your entity does not control another entity, where your control percentage is at least 40%, but less than 50%. Refer to subsection 328-125(6) of the Income Tax Assessment Act 1997 (ITAA 1997).

Different rules apply for a discretionary trust.

For detailed information about the meaning of 'connected with' and 'control', refer to section 328-125 of the ITAA 1997.

Indirect control

If your entity directly controls a second entity, and the second entity controls (whether directly or indirectly) a third entity, then your entity is taken to control the third entity.

There are some exceptions to this rule – refer to subsection 328-125(8) of the ITAA 1997.

Affiliate

An individual or company is an affiliate of your entity if, in relation to the affairs of their business, they act, or could reasonably be expected to act, in either of the following ways:

• in accordance with your entity's directions or wishes
• in concert with your entity.

Two or more entities in partnership are not each other's affiliates just because one partner acts or could reasonably be expected to act in concert with the other in relation to the affairs of the partnership business.

Exempt entity control

To work out whether one or more exempt entities control your R&D entity, you must apply the connected entity rules, but adopt 50% as the control percentage, instead of 40%.

Contact us

For information on eligible entities and how to claim the incentive:

• phone us on 13 28 66 between 8:00 am and 6:00 pm Monday to Friday.

Contact AusIndustry

For information on registration, eligibility of R&D activities and findings, you can contact AusIndustry by:

• phone on 13 28 46
• submitting an email enquiry External Link

Refer to Contact us on the business.gov.auExternal Link website for the full list of contact details.

How grouping rules work to determine which tax offset you may be entitled to under the R&D tax incentive.