Aggregated turnover
Aggregated turnover is the sum of the annual turnover for all of the following:
- the R&D entity
- any entity connected with the R&D entity
- any entity affiliated with the R&D entity.
Certain turnover amounts from dealings between these entities are excluded.
See also:
- Step 3 – calculate your aggregated turnover
- section 328-115 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.
See also:
Annual turnover
An entity's annual turnover is the total ordinary income it derived in the income year in the ordinary course of carrying on its business activities. This amount does not include GST.
If an entity is not carrying on a business at any time during the income year, its annual turnover is nil. If your entity carries on business for part of the income year, its annual turnover for that year must be worked out using a reasonable estimate of what its annual turnover would be if it carried on a business for the whole income year.
See also:
Associates
In broad terms, associates are those entities that, by reason of family or business connections, might appropriately be regarded as being associates of a particular entity.
Some examples of an associate of a company, other than a company in the capacity of trustee, include:
- a partner of the company or a partnership in which the company is a partner
- a trustee of a trust estate under which the company or associate benefits
- another entity (including a natural person) that, acting alone or with another entity or entities, sufficiently influences the company
- an entity (including a natural person) that, either alone or together with associates, holds a majority voting interest in the company
- a second company that is sufficiently influenced by the company or the company's associate
- a second company in which a majority voting interest is held by the company or the company's associate.
See also:
- section 318 of the ITAA 1936
Connected with an entity
Your entity is connected with another entity if either of the following applies:
- either entity controls the other entity
- both entities are controlled by the same third entity.
See also:
- section 328-125 of the ITAA 1997
Direct control
Broadly, your entity controls another entity if either of the following applies to your entity, its affiliates or both:
- they beneficially own or have the right to acquire the beneficial 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 beneficially own or have the right to acquire the beneficial ownership of interests in the company with at least 40% of the voting power in the company.
Different rules apply for a discretionary trust.
We can decide that your entity does not control another entity, where your control percentage is at least 40%, but less than 50%. See subsection 328-125(6) of the ITAA 1997.
For detailed information about the meaning of 'connected with' and 'control', see section 328-125 of the ITAA 1997.
Exempt entity
Exempt entity means an entity that is exempt from income tax under the ITAA 1997, ITAA 1936 or any other Commonwealth law, or an untaxable Commonwealth entity. For example, an entity that is exempt from income tax under section 50-1 of the ITAA 1997 is an exempt entity.
Feedstock input expenditure
Feedstock input expenditure refers to the expenditure incurred in one or more income years in acquiring or producing goods, or materials transformed or processed during R&D activities in producing one or more tangible products.
Feedstock outputs
Feedstock outputs refers to the tangible products produced as a result of the R&D activities (through the transformation or processing of feedstock inputs).
Feedstock revenue
Where the feedstock output is immediately sold or applied, the feedstock revenue will be its market value at that point.
Where further expenditures are incurred on the feedstock output between the R&D activity and the point of sale, then the feedstock revenue will be a proportion of the value of the marketable product that is sold. In these circumstances the feedstock revenue is calculated as follows:
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.
See also:
- subsection 328-125(8) of the ITAA 1997