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Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS

Division 355 - Research and Development

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History

Div 355 inserted by No 93 of 2011, s 3 and Sch 1 item 1, effective 8 September 2011.

No 93 of 2011, s 3 and Sch 4 items 1 to 6 contains the following application, savings and transitional provisions:

Schedule 4 - Application, savings and transitional provisions

Part 1 - Application provisions
1 Application of repeals and amendments
(1)
The repeals and amendments made by this Act apply:

(a) so far as they affect assessments - to assessments for income years commencing on or after 1 July 2011; and

(b) so far as they relate to income years but do not affect assessments - to income years commencing on or after 1 July 2011; and

(c) otherwise - to acts done or omitted to be done, states of affairs existing, or periods ending on or after the commencement of the first income year commencing on or after 1 July 2011.
Note:

For the purposes of an assessment for an income year commencing on or after 1 July 2011, regard may still be had to acts done or omitted to be done, states of affairs existing, or periods ending during an earlier income year. For example, regard may be had to expenditure incurred by other entities in income years commencing before 1 July 2011 for the purposes of paragraph 355-415(1)(b) of the Income Tax Assessment Act 1997 .

(2)
However, each of the following applies in relation to the 2011-12 financial year and all later financial years:

(a) section 29E of the Industry Research and Development Act 1986 (as inserted by Schedule 2);

(b) the repeal of paragraph 39H(b) of the Industry Research and Development Act 1986 ;

(c) section 46 of the Industry Research and Development Act 1986 (as amended by this Act).

Part 2 - General savings provisions
2 Object
2
The object of this Part is to ensure that, despite the repeals and amendments made by this Act, the full legal and administrative consequences of:

(a) any act done or omitted to be done; or

(b) any state of affairs existing; or

(c) any period ending;
before such a repeal or amendment applies, can continue to arise and be carried out, directly or indirectly through an indefinite number of steps, even if some or all of those steps are taken after the repeal or amendment applies.
3 Making and amending assessments, and doing other things etc., in relation to past matters
(1)
Even though a provision is repealed or amended by this Act, the repeal or amendment is disregarded for the purpose of doing any of the following under any Act or legislative instrument (within the meaning of the Legislative Instruments Act 2003 ):

(a) making or amending an assessment (including under a provision that is itself repealed or amended);

(b) exercising any right or power, performing any obligation or duty or doing any other thing (including under a provision that is itself repealed or amended);
in relation to any act done or omitted to be done, any state of affairs existing, or any period ending, before the repeal or amendment applies.

Note:

Examples of things covered by this subitem are as follows:

(a) an eligible company may object under Part IVC of the Taxation Administration Act 1953 in an income year commencing on or after 1 July 2011 about a notice given under former section 73I of the Income Tax Assessment Act 1936 for an income year commencing before 1 July 2011;

(b) an eligible company seeking registration under former section 39J of the Industry Research and Development Act 1986 for an income year commencing before 1 July 2011 may do so during an income year commencing on or after 1 July 2011;

(c) Innovation Australia may give a certificate under former section 39M of the Industry Research and Development Act 1986 in an income year commencing on or after 1 July 2011 about research and development activities registered for an income year commencing before 1 July 2011.

(2)
Even though a provision is repealed or amended by this Act, the repeal or amendment is disregarded so far as it relates to a state of affairs:

(a) that exists after the repeal or amendment applies; and

(b) that relates to:

(i) an act done or omitted to be done; or

(ii) a state of affairs existing; or

(iii) a period ending;
before the repeal or amendment applies.
Note:

Examples of things covered by this subitem are as follows:

(a) an amount may be included in an eligible company ' s assessable income under former subsection 73BF(4) of the Income Tax Assessment Act 1936 for an income year commencing on or after 1 July 2011 if the company receives in that income year an amount for the results of research and development activities for which the company had deductions under former section 73BA of that Act in an income year commencing before 1 July 2011;

(b) an eligible company ' s deduction under section 73B of the Income Tax Assessment Act 1936 for expenditure incurred during an income year commencing before 1 July 2011 is reduced because of section 73C of that Act if, in an income year commencing on or after 1 July 2011, the company receives a recoupment of that expenditure from the Commonwealth.

(3)
To avoid doubt, this item extends to the repeal of subsection 286-75(3) , and paragraph 286-80(2)(b) , in Schedule 1 to the Taxation Administration Act 1953 . In particular, if, in a particular case, the period in respect of which an administrative penalty is payable under subsection 286-75(3) in that Schedule:

(a) has not begun; or

(b) has begun but not ended;
when those provisions are repealed, then, despite the repeal, those provisions continue to apply in the particular case until the end of the period.

4 Saving of provisions about effect of assessments
4
If a provision or part of a provision that is repealed or amended by this Act deals with the effect of an assessment, the repeal or amendment is disregarded in relation to assessments made, before or after the repeal or amendment applies, in relation to any act done or omitted to be done, any state of affairs existing, or any period ending, before the repeal or amendment applies. 5 Repeals disregarded for the purposes of dependent provisions
5
If the operation of a provision (the subject provision ) of any Act or legislative instrument (within the meaning of the Legislative Instruments Act 2003 ) made under any Act depends to any extent on a provision that is repealed by this Act, the repeal is disregarded so far as it affects the operation of the subject provision. 6 Schedule does not limit operation of the Acts Interpretation Act 1901
6
This Schedule does not limit the operation of the Acts Interpretation Act 1901 .

Subdivision 355-D - Notional deductions for R & D expenditure

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SECTION 355-220 R & D activities conducted for a foreign entity

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355-220(1)
For the purposes of paragraph 355-210(1)(c) , the conditions for an *R & D activity conducted for one or more foreign residents are as follows:

(a) the R & D activity is conducted solely within Australia;

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(b) if the R & D activity is a *supporting R & D activity, each corresponding *core R & D activity must be:

(i) an activity conducted, or to be conducted, solely within Australia; and

(ii) an activity for which the *R & D entity is or has been registered under section 27A of the Industry Research and Development Act 1986 , or could be registered for an income year if that core R & D activity were conducted during the income year;

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(c) when the R & D activity is conducted:

(i) each foreign resident is *connected with the R & D entity; or

(ii) for each foreign resident - either the foreign resident is an *affiliate of the R & D entity or the R & D entity is an affiliate of the foreign resident;

(d) the R & D activity is conducted:

(i) in accordance with a written agreement binding on only the R & D entity and each foreign resident; and

(ii) either directly by the R & D entity, or indirectly by another entity under an agreement binding on the R & D entity;

(e) the R & D activity is not conducted in connection with an agreement covered by subsection (2).

Note:

An example of conducting an R & D activity indirectly under a contract is conducting the R & D activity under a subcontract, or one of a chain of subcontracts, under the contract.

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355-220(2)
An agreement is covered by this subsection if:

(a) the agreement is binding on the R & D entity (the first entity ) and an R & D entity that:

(i) is *connected with the first entity; or

(ii) has the first entity as an *affiliate, or is an affiliate of the first entity;

while the *R & D activity is conducted; and

(b) the R & D activity is to be conducted under the agreement by the first entity or by an entity:

(i) who is not bound by the agreement; and

(ii) who is to conduct the R & D activity directly or indirectly under another agreement to which the first entity is, or will become, bound.

Note:

One effect of this subsection is that, even if the R & D entity has an agreement with the foreign resident for conducting the R & D activity, the R & D entity cannot deduct expenditure incurred:

(a) for conducting the R & D activity as a subcontractor under a subcontract with an affiliated R & D entity; or

(b) if the R & D entity is a subcontractor to an affiliated R & D entity - for further subcontracting the conducting of the R & D activity.

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