Important notes on Part A of the Research and development tax concession schedule
Note: The 'Claimable at 150%' column has been removed. The general concessional rate of deduction for expenditure on R&D was reduced from 150% to 125% in 1996. Since that time, only certain amounts that fall within the 1996 transitional rules may be deducted at the former rate. The 'Claimable at 150%' column therefore had a very limited application. If you believe you are entitled to deduct any amount of expenditure at the rate of 150%, please contact the Innovation Segment (InnovationTax@ato.gov.au).
For items 1 to 14 in part A, note the following:
Base amount column
The base amount for each item is the amount of the deduction available for the particular classification of expenditure before any additional concessional component is added. This column includes expenditures incurred on Australian owned R&D and foreign owned R&D.
Note: Do not include the amount of the additional concession at any item in the 'Base amount' column.
Claimable at 100% column
The 'Claimable at 100%' column is for expenditure on Australian owned R&D that includes, but is not limited to, expenditure that:
- is subject to the application of clawback (section 73C of the ITAA 1936)
- represents an intra-group markup (subsections 73B(14AA) to (14AD) of the ITAA 1936)
- is subject to the operation of section 73CA of the ITAA 1936 (expenditure not at risk)
- is deductible only at the 100% rate.
Do not include expenditure on foreign owned R&D in this column. These amounts must be included in the 'Foreign owned R&D expenditure' column.
Claimable at 125% column
The 'Claimable at 125%' column is for expenditure on Australian owned R&D that is eligible for deduction at the rate of 125%. Where there is a shaded area instead of a box, the additional concession (that is, the extra 25%) does not apply to that item of expenditure.
Note: Do not include the amount of the additional concession (that is, the extra 25%) at items 1 to 15 in part A. Do this at item 16.
Foreign owned R&D expenditure column
Include in the 'Foreign owned R&D expenditure' column all expenditure incurred on foreign owned R&D that is eligible for a deduction under subsection 73B(14C) of the ITAA 1936. This expenditure is claimable at the rate of 100%. Where there is a shaded area instead of a box, no deduction is available under subsection 73B(14C) for that item of expenditure.
A deduction for expenditure on foreign owned R&D may only be claimed for amounts incurred on Australian-centred research and development activities carried out wholly or primarily on behalf of certain grouped foreign companies. The eligibility criteria for claiming this type of expenditure are set out in subsection 73B(14C). These criteria include the requirement for a written agreement between the company and the foreign company, the requirement that all eligible company group members be registered for the year in respect of their relevant Australian-centred research and development activities, and the requirement for the expenditure on foreign owned R&D to exceed $20,000 in the year.
Note: Threshold for expenditure on foreign owned R&D
Where you have incurred expenditure on foreign owned R&D that is less than or equal to $20,000 in your tax accounting period, you may need to adjust this amount for the purposes of applying the threshold test in paragraph 73B(14C)(f) of the ITAA 1936 (that is, the expenditure on foreign owned R&D by the eligible company for the year of income is greater than $20,000). The reasons for this might include:
- section 716-850 of the ITAA 1997 applies, because the company is a member of a consolidated group but has a non-membership period for the year of income, or
- the amounts reported in column 4 of part A are for a period greater or lesser than 12 months, as they relate to the company having a transitional substituted accounting period. The amount calculated in such a case, for the purposes of paragraph 73B(14C)(f), is for expenditure incurred on foreign owned R&D in the 12 months ending at the end of this transitional period.
In these circumstances, you will need to lodge your schedule and returns using the paper form available. Before doing this, you will need to email the Innovation Segment for additional instructions at InnovationTax@ato.gov.au
See Research and development tax concession for more information on eligibility for this type of deduction.
If you are claiming amounts in this column, you will also need to consider other taxation implications in regard to your related party international dealings. For further information, see Schedule 25A instructions 2009 (NAT 2639) and the taxation rulings referred to within that publication.