Income Tax Assessment Act 1936
View history note
Hide history noteDiv 3 heading inserted by No 172 of 1978.
(Repealed by No 93 of 2011)
S 73B(31) amended by No 164 of 2007. For application provision, see note under s 73B(1AAA).
S 73B(31) amended by No 101 of 2006, No 35 of 1992.
S 73B repealed by No 93 of 2011, s 3 and Sch 3 item 44, effective 8 September 2011. For application, savings and transitional provisions see note under s
82KZLB
. S 73B formerly read:
The object of this section is to provide a tax incentive, in the form of a deduction, to encourage research and development activities in Australia and make eligible companies more internationally competitive by:
The benefits of the tax incentive are targeted by being limited to particular expenditure on certain defined activities. S 73B(1AAA) amended by
No 164 of 2007
, s 3 and Sch 11 item 1, by inserting
"
encourage research and development activities in Australia and
"
after
"
deduction, to
"
, effective 25 September 2007.
No 164 of 2007
, s 3 and Sch 11 item 78, contains the following application provision:
S 73B(1AAA) inserted by No 170 of 2001.
SECTION 73B CERTAIN EXPENDITURE ON RESEARCH AND DEVELOPMENT ACTIVITIES
73B(1AAA)
Object of this section.
(a)
encouraging the development by eligible companies of innovative products, processes and services; and
(b)
increasing investment by eligible companies in defined research and development activities; and
(c)
promoting the technological advancement of eligible companies through a focus on innovation and high technical risk in defined research and development activities; and
(d)
encouraging the use by eligible companies of strategic research and development planning; and
(e)
creating an environment that is conducive to increased commercialisation of new processes and product technologies developed by eligible companies.
Application
(1)
The amendments made by this Schedule apply in relation to:
(a)
assessments for years of income starting after 30 June 2007; and
(b)
registrations under section
39J
of the
Industry Research and Development Act 1986
for those years of income.
(2)
A term that is used in this item and has a meaning given by the
Income Tax Assessment Act 1936
has the same meaning in this item.
73B(1AA) Relationship with sections 73C and 73CA.
This section has effect subject to sections 73C and 73CA .
S 73B(1AA) amended by No 101 of 2006 , s 3 and Sch 2 item 234, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(1AA) amended by No 35 of 1990 and inserted by No 167 of 1989.
73B(1AB) What is core technology.
For the purposes of this section, technology is core technology in relation to particular research and development activities if:
(a) the purpose of the activities was or is:
(i) to obtain new knowledge based on that technology; or
(ii) to create new or improved materials, products, devices, processes, techniques or services to be based on that technology; or
(b) the activities were or are an extension, continuation, development or completion of the activities that produced that technology.
S 73B(1AB) inserted by No 35 of 1990.
73B(1) Definitions.
In this section, unless the contrary intention appears:
accelerated expenditure
, in relation to an eligible company, means:
(a) contracted expenditure of the company; or
(b) expenditure incurred by the company in respect of research and development activities comprised or included in a project in relation to which the company and another company or companies are jointly registered under section 39P of the Industry Research and Development Act 1986 .
Definition of " accelerated expenditure " inserted by No 153 of 1988.
advance R and D expenditure
means research and development expenditure that is contracted expenditure in respect of which the following conditions are satisfied:
(a) the expenditure is incurred after 20 November 1987 under an agreement (whenever entered into);
(b) the eligible service period in relation to the expenditure ends more than 13 months after the day on which the expenditure is incurred;
(c) the amount of the expenditure is equal to or greater than $1,000; and
(d) the expenditure is not expenditure that is required to be incurred by a law, or by an order of a court, of the Commonwealth, a State or a Territory.
Definition of " advance R and D expenditure " amended by No 170 of 2001 and inserted by No 153 of 1988.
aggregate research and development amount
, in relation to an eligible company in relation to a year of income, means the sum of:
(a) the research and development expenditure incurred by the company during the year of income; and
(aa) the deductions allowed for core technology expenditure under subsections (12) and (12A) in the company ' s assessment in respect of income of the year of income; and
(b) one-third of the total qualifying plant expenditure of the company in relation to the year of income, where that expenditure was incurred in respect of plant:
(i) acquired, or constructed, under a contract entered into at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or
(ii) that the company commenced to construct at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; and
(ba) four-fifths of the deductible amount, or of the sum of the deductible amounts, of qualifying expenditure in relation to the company in respect of a unit or units of post-23 July 1996 pilot plant in relation to the year of income, where:
(i) the unit or units were acquired, or constructed, under a contract or contracts entered into by the company at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or
(ii) the company commenced to construct the unit or units at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; and
(baa) the amount of any notional Division 40 deduction (as defined in section 73BC ) taken into account in working out a deduction allowed or allowable to the company under section 73BA in respect of the year of income, or that would have been so allowed or allowable if the company had not chosen a tax offset under section 73BI ; and
(bb) the amount of any notional Division 42 deduction (as defined in section 73BJ ) taken into account in working out a deduction allowed or allowable to the company under section 73BH in respect of the year of income; and
(c) (Repealed by No 101 of 2006 )
(d) the amount of any deduction that has been allowed, or is allowable, under Division 43 of the Income Tax Assessment Act 1997 , in the assessment of the company in respect of income of the year of income because of the use by the company of a building for the purpose of carrying on research and development activities; and
(e) interest expenditure;
but does not include expenditure on overseas research and development activities that is not certified expenditure.
Definition of " aggregate research and development amount " amended by No 170 of 2001, No 39 of 1997, No 78 of 1996, No 181 of 1994, No 35 of 1990 and No 167 of 1989.
agreement
means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.
Definition of " agreement " inserted by No 153 of 1988.
annual leave
means leave covered by section
83-10
of the
Income Tax Assessment Act 1997
(see subsection (1) of that section).
Definition of " annual leave " substituted by No 15 of 2007, s 3 and Sch 1 item 73, applicable to the 2007-2008 income year and later years. The definition formerly read:
annual leave
has the same meaning as in subsection 26AC(4) .
approved research institute
has the same meaning as in section
73A
.
associate
has the same meaning as in section
318
.
Definition of " associate " inserted by No 11 of 1988.
Australian-centred research and development activities
means:
(a) Australian research and development activities that are covered by paragraph (a) of the definition of research and development activities ; or
(b) Australian research and development activities covered by all of the following:
(i) the activities are not covered by paragraph (a) of the definition of research and development activities ;
(ii) the activities are carried on for a purpose directly related to the carrying on of other Australian research and development activities that are of the kind referred to in paragraph (a) of that definition;
(iii) that purpose is the sole or dominant purpose for which the activities are carried on.
Definition of " Australian-centred research and development activities " inserted by No 164 of 2007 , s 3 and Sch 11 item 2, effective 25 September 2007. For application provision, see note under s 73B(1AAA) .
Australian research and development activities
means research and development activities that are carried on in Australia or in an external Territory.
Definition of " Australian research and development activities " inserted by No 181 of 1994.
Board
means Innovation Australia, established by the
Industry Research and Development Act 1986
.
Definition of " Board " amended by No 164 of 2007 , s 3 and Sch 12 item 67, by substituting " Innovation Australia, " for " the Industry Research and Development Board " , effective 27 September 2007.
building
includes a part of a building.
certified expenditure
means expenditure that was incurred by an eligible company on overseas research and development activities in respect of which the Board gave a provisional certificate under section
39ED
of the
Industry Research and Development Act 1986
before the expenditure was incurred.
Definition of " certified expenditure " inserted by No 181 of 1994.
consideration receivable
means termination value within the meaning of
40-300
of the
Income Tax Assessment Act 1997
as if that definition applied to property rather than plant.
Definition of " consideration receivable " amended by No 77 of 2001 and substituted by No 121 of 1997.
contracted expenditure
means expenditure incurred by an eligible company:
(a) on or after 1 July 1985 - to the Coal Research Trust Account;
(b) during the period commencing on 1 July 1985 and ending on 30 June 1988 - to an approved research institute; or
(c) on or after 20 November 1987 - to a body (not being an associate of the eligible company) that was, or is taken to have been, registered under section 39F of the Industry Research and Development Act 1986 when the expenditure was incurred as a research agency in respect of the class of research and development activities on which the expenditure was incurred;
in consideration for that Trust Account funding the performance of, or that institute or agency performing, on or after the date concerned, or during the period concerned, as the case may be, research and development activities on behalf of the company.
Definition of " contracted expenditure " amended by No 216 of 1991 and substituted by No 59 of 1988.
contributions to superannuation funds
, in relation to an eligible company, means expenditure that would, apart from subsection (20), be allowable as a deduction to the company under section
290-60
of the
Income Tax Assessment Act 1997
.
Definition of " contributions to superannuation funds " amended by No 15 of 2007, s 3 and Sch 1 item 74, by substituting " section 290-60 of the Income Tax Assessment Act 1997 " for " section 82AAC " , applicable to the 2007-2008 income year and later years.
Definition of " contributions to superannuation funds " amended by No 89 of 2001 and No 181 of 1994.
core technology
, in relation to research and development activities, means technology that is core technology in relation to those activities as provided by subsection (1AB).
Definition of " core technology " inserted by No 35 of 1990.
core technology adjustment amount
, in relation to an eligible company in relation to a year of income in which the company disposed of particular core technology, means the total amount of core technology expenditure incurred by the company before or during the year of income in respect of that core technology, reduced by the sum of the deductions that have been allowed to the company under subsection (12A) in previous years of income in relation to that expenditure.
Definition of " core technology adjustment amount " inserted by No 78 of 1996.
core technology expenditure
, in relation to an eligible company, means expenditure incurred by the company after 7 September 1989 in acquiring, or in acquiring the right to use, technology for the purposes of research and development activities carried on by or on behalf of the company, being technology that is core technology in relation to those activities.
Definition of " core technology expenditure " amended by No 216 of 1991 and inserted by No 35 of 1990.
"deduction acceleration factor"
(Omitted by No 181 of 1994)
Definition of " deduction acceleration factor " amended by No 224 of 1992 and No 167 of 1989.
"deduction period"
(Omitted by No 216 of 1991)
eligible company
means a body corporate incorporated under a law of the Commonwealth or of a State or Territory.
eligible feedstock expenditure
has the meaning given by subsection (1A).
Definition of " eligible feedstock expenditure " inserted by No 78 of 1996.
eligible service period
, in relation to an amount of expenditure under an agreement, means so much of the service period in relation to the expenditure as occurs after the expenditure is incurred.
Definition of " eligible service period " inserted by No 153 of 1988.
excluded plant expenditure
means:
(a) expenditure incurred by an eligible company in:
(i) the acquisition, or the construction, under a contract entered into at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or
of a unit of plant or pilot plant; and
(ii) the construction by the company, being construction that commenced at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001;
(b) any other expenditure incurred by an eligible company in the acquisition or construction, or that otherwise forms part of the cost, of a section 73BA depreciating asset (as defined by section 73BB ) or a unit of section 73BH plant (as defined by section 73BI ).
Definition of " excluded plant expenditure " amended and inserted by No 170 of 2001.
expenditure on foreign owned R
&
D
by an eligible company for a year of income has the meaning given by subsections
(14C)
and
(14D)
.
Definition of " expenditure on foreign owned R & D " inserted by No 164 of 2007 , s 3 and Sch 11 item 3, effective 25 September 2007. For application provision, see note under s 73B(1AAA) .
feedstock expenditure
, in relation to an eligible company, means expenditure incurred by the company in acquiring or producing materials or goods to be the subject of processing or transformation by the company in research and development activities, and includes expenditure incurred by the company on any energy input directly into the processing or transformation.
Definition of " feedstock expenditure " inserted by No 78 of 1996.
feedstock input
, in relation to an eligible company in relation to a year of income, means the company
'
s feedstock expenditure in respect of materials or goods that were the subject of processing or transformation by the company in research and development activities during the year of income.
Definition of " feedstock input " inserted by No 78 of 1996.
feedstock output
, in relation to an eligible company in relation to a year of income, means the sum of the amounts worked out under paragraphs (a) and (b) in relation to any products that were obtained by the company during the year of income from the processing or transformation of materials or goods the acquisition or production of which was feedstock expenditure of the company:
(a) if any of those products were sold by the company during the year of income by a transaction or transactions entered into at arm ' s length with the buyer or buyers - the amount or amounts received or receivable by the company from the sale or sales;
(b) if any of those products were not sold by the company during the year of income or were sold by the company otherwise than by a transaction or transactions entered into at arm ' s length with the buyer or buyers - the amount or amounts (if any) that would have been received by the company by selling those products at the end of the year of income by a transaction or transactions entered into at arm ' s length with the buyer or buyers.
Definition of " feedstock output " inserted by No 78 of 1996.
foreign company
means a body corporate that:
(a) is incorporated under a law of a foreign country; and
(b) is a resident of a foreign country for the purposes of a double tax agreement (as defined in Part X ) that relates to that foreign country.
Definition of " foreign company " inserted No 164 of 2007 , s 3 and Sch 11 item 4, effective 25 September 2007. For application provision, see note under s 73B(1AAA) .
ineligible pilot plant amount
, in relation to a unit of pilot plant to which subsection (6) applies, means the difference between the amount that would, apart from the operation of subsection (6), be the cost of the unit and $10,000,000.
interest expenditure
, in relation to an eligible company in relation to a year of income, means interest, or an amount in the nature of interest, incurred by the company during the year of income in the financing of research and development activities.
Definition of " interest expenditure " inserted by No 78 of 1996.
knowledge
means any knowledge or other information, whether or not the possessor of the knowledge or information has legally enforceable rights in relation to it.
Definition of " knowledge " inserted by No 35 of 1990.
long service leave
means leave covered by Subdivision
83-B
of the
Income Tax Assessment Act 1997
(see section
83-70
of that Act).
Definition of " long service leave " substituted by No 15 of 2007, s 3 and Sch 1 item 75, applicable to the 2007-2008 income year and later years. The definition formerly read:
long service leave
has the same meaning as in subsection 26AD(8) .
non-associate
, in relation to an eligible company, means a person who is not an associate of the company.
Definition of " non-associate " inserted by No 11 of 1988.
overseas research and development activities
means research and development activities that are carried on outside Australia and the external Territories.
Definition of " overseas research and development activities " inserted by No 181 of 1994.
pilot plant
means an experimental model of other plant for use in research and development activities or for use in commercial production, being a model that is not for use in commercial production but that has the intended essential characteristics of the other plant of which it is a model.
Definition of " pilot plant " amended by No 167 of 1989.
plant
means:
(a) things that are plant within the meaning of section 45-40 of the Income Tax Assessment Act 1997 ; or
(b) things to which section 45-40 of that Act would apply if the carrying on of research and development activities were the carrying on of a business for the purpose of producing assessable income; or
(c) pilot plant other than post-23 July 1996 pilot plant.
Definition of " plant " amended by No 77 of 2001 and No 121 of 1997 and substituted by No 167 of 1989.
plant expenditure
, in relation to an eligible company, means expenditure incurred by the company in:
(a) the acquisition, or the construction, under a contract entered into on or after 1 July 1985, of a unit of plant other than post-23 July 1996 pilot plant; or
(b) the construction by the company, being construction that commenced on or after 1 July 1985, of a unit of plant other than post-23 July 1996 pilot plant,
being a unit of plant for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities at least for an initial period.
Definition of " plant expenditure " amended by No 170 of 2001, No 78 of 1996 and No 216 of 1991.
post-23 July 1996 pilot plant
means pilot plant referred to in subsection (4C).
Definition of " post-23 July 1996 pilot plant " inserted by No 78 of 1996.
research and development activities
means:
(a) systematic, investigative and experimental activities that involve innovation or high levels of technical risk and are carried on for the purpose of:
(i) acquiring new knowledge (whether or not that knowledge will have a specific practical application); or
(ii) creating new or improved materials, products, devices, processes or services; or
(b) other activities that are carried on for a purpose directly related to the carrying on of activities of the kind referred to in paragraph (a).
Definition of " research and development activities " amended by No 78 of 1996 and substituted by No 181 of 1994.
research and development expenditure
, in relation to an eligible company in relation to a year of income, means expenditure (other than core technology expenditure, interest expenditure, feedstock expenditure, excluded plant expenditure or expenditure incurred in the acquisition or construction of a building or of an extension, alteration or improvement to a building) incurred by the company during the year of income, being:
(a) contracted expenditure of the company;
(b) salary expenditure of the company, being expenditure incurred on or after 1 July 1985; or
(c) other expenditure incurred on or after 1 July 1985 directly in respect of research and development activities carried on by or on behalf of the company on or after 1 July 1985;
and includes any eligible feedstock expenditure that the company has in respect of the year of income in respect of related research and development activities.
Definition of " research and development expenditure " inserted by No 170 of 2001, No 78 of 1996, No 216 of 1991 and No 35 of 1990.
residual feedstock expenditure
, in relation to an eligible company in relation to a year of income in relation to related research and development activities, means the lesser of:
(a) the company ' s feedstock input in respect of the year of income in relation to those activities; or
(b) the company ' s feedstock output in respect of the year of income in relation to those activities.
Definition of " residual feedstock expenditure " amended by No 147 of 1997 and inserted by No 78 of 1996.
salary expenditure
, in relation to an eligible company in relation to a year of income, means the sum of:
(a) the expenditure, not being expenditure referred to in paragraph (b), incurred by the company during the year of income by way of salaries, wages, allowances, bonuses, overtime payments or penalty rate payments for officers or employees of the company, being expenditure incurred directly in respect of research and development activities carried on by or on behalf of the company on or after 1 July 1985;
(b) in relation to each officer or employee of the company who was engaged at any time during the year of income in research and development activities carried on by or on behalf of the company - so much of the expenditure incurred by the company during the year of income in respect of annual leave, sick leave or long service leave for that officer or employee or contributions to superannuation funds in respect of that officer or employee as bears to that amount the same proportion as the proportion of the year of income during which that officer or employee was engaged in research and development activities carried on by or on behalf of the company bears to the proportion of the year of income during which that officer or employee was engaged in any activities carried on by or on behalf of the company; and
(c) so much of the expenditure incurred by the company during the year of income on pay-roll tax and premiums for workers ' compensation insurance as the Commissioner considers reasonable having regard to:
(i) the amount of the expenditure incurred by the company during the year of income to which paragraph (a) or (b) applies;
(ii) the total expenditure incurred by the company during the year of income in respect of salaries, wages, allowances, bonuses, overtime payments, penalty rate payments, annual leave, sick leave and long service leave in respect of all officers and employees of the company; and
(iii) such other matters as the Commissioner considers relevant.
Definition of " salary expenditure " amended by No 216 of 1991 and No 97 of 1989.
service period
, in relation to an amount of expenditure under an agreement, means the period during which the thing done under the agreement in return for the amount of expenditure is done.
Definition of " service period " inserted by No 153 of 1988.
sick leave
means any period of leave in excess of 14 consecutive days, being leave, however described, granted by an employer (whether voluntarily, by agreement or in accordance with a law) to an employee in respect of the physical or mental incapacity of the employee.
technology
means knowledge or anything produced by the application of knowledge.
Definition of " technology " inserted by No 35 of 1990.
written-down value
has the meaning given by subsections (4A) and (4B).
Definition of " written-down value " substituted by No 78 of 1996.
S 73B(1) amended by No 101 of 2006 , s 3 and Sch 2 items 235 to 236, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
Archived:
S 73B(1) para (c) of the definition of " aggregate research and development amount " and the definitions of " building expenditure " and " undeducted building expenditure " repealed as inoperative by No 101 of 2006 , s 3 and Sch 1 items 80 to 82, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive .
73B(1A) What is eligible feedstock expenditure.
For the purposes of this section, an eligible company has eligible feedstock expenditure in respect of a year of income in relation to related research and development activities if the company ' s feedstock input in respect of the year of income in relation to those activities exceeded the company ' s feedstock output in respect of the year of income in relation to those activities, and the amount of the excess constitutes the company ' s eligible feedstock expenditure in respect of the year of income in relation to those activities.
S 73B(1A) inserted by No 78 of 1996.
Former s 73B(1A) omitted by No 135 of 1990 and inserted by No 11 of 1988.
73B(1B) Limit on what is contracted expenditure.
Expenditure referred to in paragraph (c) of the definition of contracted expenditure in subsection (1) does not constitute contracted expenditure for the purposes of this section unless, when the expenditure was incurred, the eligible company that incurred the expenditure was capable of utilising, or had formulated a plan to utilise, any results of the research and development activities directly in connection with a business that that company carried on or proposed to carry on.
S 73B(1B) inserted by No 59 of 1988.
73B(1BA)
Subsection (1B) does not apply to expenditure covered by subsection (14C) (ignoring paragraphs (14C)(f) and (g)).
S 73B(1BA) inserted by No 164 of 2007 , s 3 and Sch 11 item 5, effective 25 September 2007. For application provision, see note under s 73B(1AAA) .
73B(1C) What use of plant counts for definition of plant expenditure
For the purposes of the application of the definition of plant expenditure in subsection (1), or for the purposes of the application of paragraph (31)(a), in relation to an eligible company, a unit of plant is not to be taken not to be for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities merely because the company has, on or after 21 November 1987, entered into an agreement with another person (whether or not an eligible company) for that person to use the unit of plant exclusively for the purpose of the carrying on by or on behalf of that person of research and development activities (whether or not the same as the first-mentioned activities).
S 73B(1C) inserted by No 167 of 1989.
73B(2) Disregarding transfer of property connected with security.
For the purpose of this section, disregard an acquisition or disposal of property by way of the transfer of the property for the provision or redemption of a security. Consequently this section applies as if the person who was the owner of the property before the transfer continues to be the owner after the transfer.
S 73B(2) inserted by No 72 of 2001.
Former s 73B(2) omitted by No 78 of 1996 and amended by No 98 of 1992 and No 11 of 1988.
73B(2A) Limits on what are research and development activities.
For the purposes of the definition of research and development activities in subsection (1), activities carried on by or on behalf of an eligible company by way of the development of computer software shall not be taken to be systematic, investigative and experimental activities unless the computer software is developed for the purpose, or for purposes that include the purpose, of sale, rent, licence, hire or lease to 2 or more non-associates of the company (counting a non-associate of the company and the associates of such a non-associate together as one person).
S 73B(2A) amended by No 78 of 1996 and inserted by No 11 of 1988.
73B(2B)
For the purposes of the definition of research and development activities in subsection (1):
(a) activities are not taken to involve innovation unless they involve an appreciable element of novelty; and
(b) activities are not taken to involve high levels of technical risk unless:
(i) the probability of obtaining the technical or scientific outcome of the activities cannot be known or determined in advance on the basis of current knowledge or experience; and
(ii) the uncertainty of obtaining the outcome can be removed only through a program of systematic, investigative and experimental activities in which scientific method has been applied, in a systematic progression of work (based on principles of physical, biological, chemical, medical, engineering or computer sciences) from hypothesis to experiment, observation and evaluation, followed by logical conclusions.
S 73B(2B) inserted by No 78 of 1996.
73B(2BA)
Activities are not covered by the definition of research and development activities in subsection (1) unless they are carried on in accordance with a plan that complies with any guidelines formulated by the Board under section 39KA of the Industry Research and Development Act 1986 that are in force at the time.
S 73B(2BA) inserted by No 170 of 2001.
73B(2C)
For the purposes of this section, the following activities are taken not to be systematic, investigative and experimental activities:
(a) market research, market testing or market development, or sales promotion (including consumer surveys);
(b) quality control;
(c) prospecting, exploring or drilling for minerals or natural gas for the purpose of discovering deposits, determining more precisely the location of deposits or determining the size or quality of deposits;
(d) the making of cosmetic modifications or stylistic changes to products, processes or production methods;
(e) management studies or efficiency surveys;
(f) research in social sciences, arts or humanities;
(g) the making of donations;
(h) pre-production activities such as demonstration of commercial viability, tooling-up and trial runs;
(i) routine collection of information, except as part of the research and development process;
(j) preparation for teaching;
(k) commercial, legal and administrative aspects of patenting, licensing or other activities;
(l) activities associated with complying with statutory requirements or standards, such as the maintenance of national standards, the calibration of secondary standards and routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things;
(m) specialised routine medical care;
(n) any activity related to the reproduction of a commercial product or process by a physical examination of an existing system or from plans, blueprints, detailed specifications or publicly available information.
S 73B(2C) amended by No 101 of 2006 , s 3 and Sch 2 item 237, by omitting " , petroleum " after " minerals " in para (c), effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(2C) inserted by No 78 of 1996.
73B(3) Expenditure by eligible company as trustee not counted.
A reference in this section to the incurring of expenditure by an eligible company does not include a reference to expenditure incurred by the company in the capacity of a trustee or nominee other than expenditure incurred by the company on or after 1 July 1988 in the capacity of a trustee of a public trading trust for the purposes of Division 6C in relation to the year of income in which the expenditure was incurred.
S 73B(3) amended by No 167 of 1989.
73B(3A) Partnerships.
Where expenditure (whether incurred wholly, or only partly, on research and development activities) has, on or after 21 November 1987, been incurred by a partnership in which, when the expenditure was incurred:
(a) at least one partner was an eligible company; and
(b) either:
(i) each other partner was:
(A) an eligible company; or
(B) a body corporate that was, or is taken to have been, registered under section 39F of the Industry Research and Development Act 1986 as a research agency in respect of the class of research and development activities on which the expenditure was incurred; or
(ii) the partnership was designated as a Co-operative Research Centre under the program known as the Co-operative Research Centres Program;
the following paragraphs have effect:
(c) each partner is to be taken for the purposes of this section, sections 73C and 73CA of this Act, and Subdivision 20-A of the Income Tax Assessment Act 1997 , to have incurred so much (if any) of the expenditure as was incurred out of money contributed by the partner (otherwise than by way of loan), whether in the year of income in which the expenditure was incurred or a previous year of income;
(d) if the partnership has, whether before or after the commencement of this subsection, received, or become entitled to receive, a recoupment of, or a grant in respect of, the whole or any part of the expenditure, each partner is to be taken for the purposes of this section, sections 73C and 73CA of this Act, and Subdivision 20-A of the Income Tax Assessment Act 1997 , to have received, or become entitled to receive, so much (if any) of the recoupment or grant as is calculated in accordance with the formula:
|
amount of recoupment or grant
×
partner
'
s contribution
total contribution |
where:
(da) if the partnership is not designated as a Co-operative Research Centre under the program known as the Co-operative Research Centres Program - subsection 73CA(2A) does not apply in relation to the expenditure that a partner is so taken to have incurred;
(e) any expenditure that a partner is to be so taken to have incurred, and any recoupment or grant that a partner is to be so taken to have received or become entitled to receive, is not to be taken into account in determining the net income of the partnership or any partnership loss, as the case may be, of the year of income; and
(f) subject to paragraphs (c), (d), (da) and (e), this section, sections 73C and 73CA of this Act, and Subdivision 20-A of the Income Tax Assessment Act 1997 , apply in relation to each such partner that is an eligible company as if that partner, and not the partnership, were, or had been, carrying on the relevant project and activities, but so apply with such modifications to those sections as are appropriate having regard to the partner ' s interest in the partnership.
S 73B(3A) amended by No 101 of 2006 , s 3 and Sch 2 items 238 to 240, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(3A) amended by No 121 of 1997, No 80 of 1992, No 35 of 1990 and inserted by No 167 of 1989.
73B(3B)
In determining whether a relationship between persons for the purpose of engaging in research and development activities constitutes a partnership for the purposes of this Act, the engaging by those persons in those activities is to be taken to constitute carrying on a business with a view to profit.
S 73B(3B) inserted by No 167 of 1989.
73B(4) Definition of qualifying plant expenditure .
Subject to subsection (5), if, during a year of income:
(a) an eligible company commences to use a unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and
(b) the eligible company has incurred an amount of plant expenditure in respect of the unit;
that amount is, in relation to the unit, taken to be an amount of qualifying plant expenditure in relation to the company in relation to the year of income and each of the 2 succeeding years of income.
Archived:
S 73B(4) substituted by No 101 of 2006 , s 3 and Sch 2 item 241, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive .
73B(4A) Definitions of written-down value .
The written-down value of a unit of plant other than post-23 July 1996 pilot plant:
(a) that is owned by a company; and
(b) in relation to which a deduction has been allowed under this section from the company ' s assessable income;
is the amount worked out using the formula:
where:
cost means the cost of the unit.
number of deductible years means the number of years of income in respect of which a deduction has been allowed from the company ' s assessable income under this section in relation to the unit.
S 73B(4A) inserted by No 78 of 1996.
73B(4B)
The written-down value of a unit of post-23 July 1996 pilot plant:
(a) that is owned by a company; and
(b) in relation to which a deduction has been allowed under this section from the company ' s assessable income;
is the amount worked out using the formula:
| Qualifying expenditure − Notional deductions |
where:
qualifying expenditure means the amount of the qualifying pilot plant expenditure in relation to the company in respect of the unit.
notional deductions means the total amount of the deductions (if any) that would have been allowed or allowable under this section from the company ' s assessable income of any year of income in respect of the unit if, in calculating the amount of any such deduction, any provision for an amount to be multiplied by a number greater than one had not been included.
S 73B(4B) inserted by No 78 of 1996.
73B(4C) Definition of qualifying pilot plant expenditure .
If:
(a) an eligible company incurs expenditure in the acquisition, or the construction, under a contract entered into after 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996, of a unit of pilot plant; and
(b) the unit of pilot plant was acquired or constructed for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities;
the expenditure is qualifying pilot plant expenditure in relation to the company in respect of the unit of pilot plant.
S 73B(4C) inserted by No 78 of 1996.
73B(4D) Deductible amount of qualifying expenditure on post-23 July 1996 pilot plant.
If the amount that, apart from paragraph (ba) of the definition of aggregate research and development amount in subsection 73B(1) , would be the aggregate research and development amount in relation to an eligible company in relation to a year of income does not exceed $20,000, the deductible amount of qualifying expenditure in relation to the company in respect of a unit of post-23 July 1996 pilot plant in respect of the year of income is the annual deduction percentage of the qualifying pilot plant expenditure in relation to the company in respect of the unit of pilot plant.
S 73B(4D) inserted by No 78 of 1996.
73B(4E)
If the amount that, apart from paragraph (ba) of the definition of aggregate research and development amount in subsection 73B(1) , would be the aggregate research and development amount in relation to an eligible company in relation to a year of income exceeds $20,000, the deductible amount of qualifying expenditure in relation to the company in respect of a unit of post-23 July 1996 pilot plant in respect of the year of income is the annual deduction percentage of the qualifying pilot plant expenditure in relation to the company in respect of the unit of pilot plant, multiplied by 1.25.
S 73B(4E) amended by No 78 of 1996 and inserted by No 78 of 1996.
73B(4F)
The annual deduction percentage for a unit of post-23 July 1996 pilot plant is worked out in relation to a company under subsection (4G) or (4H), as the case requires.
S 73B(4F) inserted by No 78 of 1996.
73B(4G)
If:
(a) the qualifying pilot plant expenditure in relation to an eligible company in respect of a unit of post-23 July 1996 pilot plant does not exceed $300 or such higher amount as is prescribed; or
(b) the useful life of the unit of post-23 July 1996 pilot plant is less than 3 years;
the annual deduction percentage for the unit is 100%.
S 73B(4G) inserted by No 78 of 1996.
73B(4H)
If subsection (4G) does not apply in respect of a unit of post-23 July 1996 pilot plant, the annual deduction percentage for the unit is two-thirds of the percentage worked out using the following table:
| Table of percentages | ||
| Item | Years in useful life | Percentage |
| 1 | 3 to fewer than 5 | 60% |
| 2 | 5 to fewer than 6 ⅔ | 40% |
| 3 | 6 ⅔ to fewer than 10 | 30% |
| 4 | 10 to fewer than 13 | 25% |
| 5 | 13 to fewer than 30 | 20% |
| 6 | 30 or more | 10% |
S 73B(4H) amended by No 147 of 1997 and inserted by No 78 of 1996.
73B(4J)
The useful life of a unit of post-23 July 1996 pilot plant owned by an eligible company (the relevant unit ) is the period that would be the effective life of the relevant unit under Subdivision 40-B of the Income Tax Assessment Act 1997 if:
(a) the company could deduct amounts for the decline in value of the relevant unit under Division 40 of that Act; and
(b) any reference in Division 40 of that Act to using an asset for a taxable purpose included a reference to the use of the relevant unit by or on behalf of the company exclusively for carrying on research and development activities.
S 73B(4J) amended by No 77 of 2001 and No 16 of 1998 and inserted by No 78 of 1996.
73B(5) Limit on qualifying plant expenditure.
If:
(a) apart from this subsection, there would be an amount of qualifying plant expenditure in relation to a unit of plant owned by an eligible company in relation to a year of income; and
(b) at any time during the year of income, the company ceases to use that unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities;
there is no amount of qualifying plant expenditure in relation to that unit of plant in relation to the year of income or any succeeding year of income.
Archived:
S 73B(5) substituted by No 101 of 2006 , s 3 and Sch 2 item 242, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive .
73B(5AA)
Subject to subsection (5AB), an eligible company is not to be taken for the purposes of paragraph (5)(b) to have ceased during a year of income to use a unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities merely because on or after 21 November 1987 and during the whole or a part of the year of income another person (whether or not an eligible company) used the unit of plant, with the consent of the company, exclusively for the purpose of the carrying on by or on behalf of that other person of research and development activities (whether or not the same as the activities for which the unit of plant has been used by the company).
S 73B(5AA) inserted by No 167 of 1989.
73B(5AB)
Subsection (5AA) does not apply in relation to a unit of plant owned by an eligible company in relation to a year of income unless the only reason for any failure of the company to use the unit of plant during the whole or a part of the year of income for the purpose of the carrying on by or on behalf of the company of research and development activities was the use made of the unit of plant during the year of income by another person as mentioned in that subsection.
S 73B(5AB) inserted by No 167 of 1989.
73B(5A) Expenditure on building does not count for this section.
This section does not apply to expenditure incurred by an eligible company in the acquisition or construction of a building or of an extension, alteration or improvement to a building.
Archived:
S 73B(5A) substituted by No 101 of 2006 , s 3 and Sch 2 item 243, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive .
73B(6) Cost of plant before 19 August 1992.
If:
(a) the cost of a unit of pilot plant to an eligible company exceeds $10 million; and
(b) any of the following applies:
(i) the unit was acquired by the eligible company under a contract entered into before 19 August 1992;
(ii) the construction of the unit commenced before 19 August 1992;
(iii) a contract for the construction of the unit was entered into before 19 August 1992;
the cost of the unit of plant is taken, for the purposes of this section, to be $10 million.
S 73B(6) substituted by No 224 of 1992.
73B(8)
(Omitted by No 167 of 1989)
73B(9) No deduction for expenditure on activities for another person.
A deduction is not allowable under this section (except subsection (14C) ) in respect of expenditure incurred by an eligible company for the purpose of carrying on research and development activities on behalf of any other person, and expenditure of that kind shall be disregarded for the purposes of the application of this section (except subsections (14C) and (14D) ) to the company.
S 73B(9) amended by No 164 of 2007 , s 3 and Sch 11 items 6 and 7, by inserting " (except subsection (14C)) " after " this section " (first occurring) and inserting " (except subsections (14C) and (14D)) " after " this section " (last occurring), effective 25 September 2007. For application provision, see note under s 73B(1AAA) .
73B(9A)
Subsection (9) does not apply in relation to expenditure incurred on or after 21 November 1987 on behalf of a partnership by a partner in the partnership in that partner ' s capacity as such a partner.
S 73B(9A) inserted by No 167 of 1989.
73B(10) No deduction for unregistered company.
A deduction is not allowable under this section to an eligible company for a year of income in respect of expenditure in relation to research and development activities unless:
(a) the company is registered, in relation to the year of income and in relation to those activities, under section 39J of the Industry Research and Development Act 1986 ; or
(b) the company is registered, in relation to the year of income and in relation to a project comprising or including those activities, under section 39P of that Act.
S 73B(10) amended by No 82 of 1996; substituted by No 224 of 1992 and amended by No 59 of 1988.
73B(11) Advance R and D expenditure.
For the purposes of this section:
(a) subject to paragraph (b), advance R and D expenditure of an eligible company shall be taken to be incurred in equal proportions throughout its eligible service period; and
(b) where advance R and D expenditure of an eligible company is accelerated expenditure and its eligible service period occurs in 2 or more years of income - any part of that expenditure that would otherwise be taken by paragraph (a) to be incurred in the second or a later year of income shall instead be taken to be incurred in equal proportions throughout the part of the eligible service period occurring in the year of income preceding that second or later year of income.
S 73B(11) inserted by No 153 of 1988.
Former s 73B(11) omitted by No 59 of 1988.
73B(12) Deductions for core technology expenditure.
Subject to this section, where an eligible company incurs core technology expenditure during a year of income under a contract entered into before 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996, the amount of that expenditure is allowable as a deduction from the assessable income of the company of the year of income.
S 73B(12) amended by No 78 of 1996 and inserted by No 35 of 1990.
Former s 73B(12) omitted by No 59 of 1988.
73B(12A)
Subject to this section, if:
(a) an eligible company has, before or during the year of income, incurred core technology expenditure in respect of particular core technology (the relevant core technology ) under a contract entered into at or after the time referred to in subsection (12); and
(b) during the year of income the company incurs research and development expenditure that is related to the relevant core technology;
there is allowable as a deduction from the company ' s assessable income of the year of income so much of the amount worked out using the formula in subsection (12B) in respect of that core technology expenditure as does not exceed one-third of the amount of that related research and development expenditure.
S 73B(12A) inserted by No 78 of 1996.
73B(12B)
The formula for the purposes of subsection (12A) is:
| Undeducted expenditure | − | Current year core technology adjustment amount |
where:
undeducted expenditure means so much of the core technology expenditure incurred by the company during the current year or previous years of income in relation to the relevant core technology under contracts entered into at or after the time referred to in subsection (12) as has not been allowed as a deduction from the company ' s assessable income of any of those previous years of income.
current year core technology adjustment amount, in relation to a company in relation to a year of income in which:
(a) an amount or amounts are included in the company ' s assessable income under subsection (27A) because the company received or was entitled to receive an amount or amounts from the disposal of the relevant core technology; or
(b) an amount or amounts would be so included apart from the operation of paragraph 73B(27C)(c) ;
means:
(c) the core technology adjustment amount in relation to the company in relation to that year of income in respect of the relevant core technology; or
(d) the amount or the sum of the amounts referred to in paragraph (b);
whichever is the less.
S 73B(12B) amended by No 147 of 1997 and inserted by No 78 of 1996.
73B(12C)
A deduction in respect of core technology expenditure is not allowable from a taxpayer ' s assessable income of any year of income under any provision of this Act other than this section.
S 73B(12C) inserted by No 78 of 1996.
73B(13) Deduction for contracted expenditure.
Subject to this section, where an eligible company incurs contracted expenditure during a year of income, the amount of that expenditure multiplied by 1.25 is an allowable deduction to the company for the year of income.
S 73B(13) amended by No 78 of 1996 and No 224 of 1992 and substituted by No 167 of 1989.
73B(14) Deduction for research and development expenditure.
Subject to this section, where:
(a) an eligible company incurs research and development expenditure (other than contracted expenditure) during a year of income; and
(b) the aggregate research and development amount in relation to the company in relation to the year of income is greater than $20,000,
the amount of that expenditure multiplied by 1.25 is allowable as a deduction from the assessable income of the company of the year of income.
S 73B(14) amended by No 78 of 1996 and No 181 of 1994.
73B(14AA) Reduced rate of deduction under subsection (13) or (14).
A part of an eligible company ' s deduction for a year of income under subsection (13) or (14) in respect of a particular amount of research and development expenditure (the R & D amount ) is worked out by multiplying the R & D amount by 1 rather than 1.25 if subsection (14AB) applies to the R & D amount.
S 73B(14AA) inserted by No 170 of 2001.
73B(14AB)
This subsection applies to an R & D amount of an eligible company for a year of income if:
(a) any other person (within the meaning of section 73H ) incurred expenditure during that year of income or an earlier one in respect of all or a part of the things for which the R & D amount was for; and
(b) the other person was grouped with the eligible company as mentioned in section 73L at the time the expenditure was incurred by the other person.
S 73B(14AB) inserted by No 170 of 2001.
73B(14AC)
The part of the eligible company ' s R & D amount for the year of income that is multiplied by 1.25 under subsection (13) or (14) is:
R & D amount − Total group markup
where:
total group markup
is:
(a) the sum of the amounts derived by persons during the year of income for goods or services in respect of all or a part of the things for which the R & D amount was for while those persons were grouped with the eligible company as mentioned in section 73L ; less
(b) the actual cost to those persons of providing those goods or services.
S 73B(14AC) inserted by No 170 of 2001.
73B(14AD)
The part of the eligible company ' s R & D amount for the year of income that is multiplied by 1 rather than 1.25 is the part of the R & D amount representing the total group markup.
S 73B(14AD) inserted by No 170 of 2001.
73B(14A) Deduction for interest expenditure.
Subject to this section, if an eligible company incurs interest expenditure during a year of income, the amount of that expenditure is allowable as a deduction from the company ' s assessable income of the year of income.
S 73B(14A) inserted by No 78 of 1996.
73B(14B) Deduction for residual feedstock expenditure.
Subject to this section, if an eligible company has any residual feedstock expenditure in respect of a year of income in relation to related research and development activities, the amount of that expenditure is allowable as a deduction from the company ' s assessable income of the year of income.
S 73B(14B) amended by No 147 of 1997 and inserted by No 78 of 1996.
73B(14C) Deduction for expenditure on foreign owned R & D.
An eligible company may deduct for a year of income the amount (the expenditure on foreign owned R & D by the eligible company for the year of income) worked out under subsection (14D) if:
(a) the eligible company incurs expenditure in the year of income at a time when the eligible company is grouped under section 73L with a foreign company; and
(b) the expenditure is for the purpose of the carrying on of Australian-centred research and development activities; and
(c) the activities are, are to be or were carried on wholly or primarily on behalf of the foreign company; and
(d) the activities are, are to be or were carried on directly or indirectly under a written agreement between the eligible company and the foreign company and no other parties for the activities to be performed:
(i) by the eligible company; or
(ii) by another person directly or indirectly under another agreement to which the eligible company is, or will become, a party; and
(e) the expenditure is not incurred in connection with an agreement that:
(i) is between the eligible company and another eligible company that is grouped under section 73L with the eligible company when the expenditure is incurred; and
(ii) is an agreement for the activities to be performed either by the eligible company or by a person who is not a party to the agreement and is to perform the activities directly or indirectly under another agreement to which the eligible company is, or will become, a party; and
(f) the expenditure on foreign owned R & D by the eligible company for the year of income is greater than $20,000; and
(g) the eligible company, and each other eligible company (if any) that is grouped under section 73L with that company at any time in the year of income, is registered under section 39J of the Industry Research and Development Act 1986 in relation to the year of income and all activities that meet both the following conditions:
(i) the activities are ones that, if subsection (2BA) had not been enacted, would be Australian-centred research and development activities carried on wholly or primarily on behalf of a foreign company (whether or not the activities would be such Australian-centred research and development activities taking account of that subsection);
(ii) the activities are ones in relation to which the eligible company or the other eligible company (as appropriate) incurred expenditure during the year of income.
Note 1:
An example of the carrying on or performance of activities indirectly under an agreement that is a contract is the carrying on or performance of the activities under a subcontract, or one of a chain of subcontracts, under the agreement.
Note 2:
One effect of paragraph (14C)(e) is that, even if the eligible company has an agreement with the foreign company for the carrying on or Australian-centred research and development activities wholly or primarily on behalf of the foreign company, the eligible company cannot deduct its expenditure:
Note 3:
The eligible company may get an extra deduction under section 73QB if its expenditure on foreign owned R & D for the year of income is greater than the average of the amounts that would be the expenditure on foreign owned R & D by the eligible company for the 3 previous years of income if subsection (2BA) of this section had not been enacted.
S 73B(14C) inserted by No 164 of 2007 , s 3 and Sch 11 item 8, effective 25 September 2007. For application provision, see note under s 73B(1AAA) .
73B(14D)
The expenditure on foreign owned R & D by the eligible company for the year of income is the amount that would be the eligible company ' s incremental expenditure under section 73P for the year of income if:
(a) the Australian-centred research and development activities covered by subsection (14C) (ignoring paragraphs (14C)(f) and (g) ) of this section were carried on on behalf of the eligible company (and not on behalf of the foreign company mentioned in paragraph (14C)(c) ); and
(b) the only expenditure incurred by the eligible company in the year of income in relation to research and development activities had been the expenditure covered by subsection (14C) (ignoring paragraphs (14C)(f) and (g) ) of this section; and
(c) the total group markup (if any) of the eligible company for the year of income were the amount (if any) that would be worked out under subsection (14AC) of this section if the company were working out the amount of a deduction under subsection (13) or (14) of this section on the basis described in paragraphs (a) and (b) of this subsection.
Note 1:
Paragraphs (14D)(a) and (b) affect what would be the eligible company ' s incremental expenditure by affecting expenditure described in definitions of terms (eg contracted expenditure and salary expenditure ) used in the definition of research and development expenditure , on which incremental expenditure is based.
Note 2:
Subsection 73P(5) excludes a company ' s total group markup (worked out under subsection (14AC) of this section) from the company ' s incremental expenditure. The markup is worked out to affect a deduction by the company under subsection (13) or (14) of this section for an amount of research and development expenditure to which subsection (14AB) of this section applies.
S 73B(14D) inserted by No 164 of 2007 , s 3 and Sch 11 item 8, effective 25 September 2007. For application provision, see note under s 73B(1AAA) .
73B(15) Deduction for qualifying plant expenditure.
Subject to this section, where, in the year of income during which an eligible company commences to use a unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities or in either of the 2 succeeding years of income, there is an amount of qualifying plant expenditure in relation to the company in relation to the unit of plant:
(a) in a case where the aggregate research and development amount in relation to the company in relation to the year of income is greater than $20,000 - one-third of the amount of that qualifying plant expenditure multiplied by 1.25; or
(b) in any other case - one-third of the amount of that qualifying plant expenditure,
is allowable as a deduction from the assessable income of the company of the year of income.
S 73B(15) amended by No 78 of 1996 and No 181 of 1994.
73B(15AAA)
Subsection (15) does not apply to a unit of plant:
(a) acquired, or constructed, under a contract entered into by the company after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or
(b) that the company commenced to construct after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001.
S 73B(15AAA) inserted by No 170 of 2001.
73B(15AA) Deduction for qualifying expenditure on post-23 July 1996 pilot plant.
Subject to this section, if in a year of income an eligible company uses a unit of post-23 July 1996 pilot plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, the deductible amount of qualifying expenditure in relation to the company in respect of the unit is an allowable deduction from the company
'
s assessable income of the year of income.
Note:
If Division 250 of the Income Tax Assessment Act 1997 applies to you and an asset:
S 73B(15AA) amended by No 164 of 2007 , s 3 and Sch 1 item 29, by inserting the note at the end, effective 25 September 2007.
S 73B(15AA) inserted by No 78 of 1996.
73B(15AAAA)
Subsection (15AA) does not apply to a unit of post-23 July 1996 pilot plant:
(a) acquired, or constructed, under a contract entered into by the company after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or
(b) that the company commenced to construct after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001.
S 73B(15AAAA) inserted by No 170 of 2001.
73B(15AB)
The sum of the deductions that, apart from this subsection, would be allowable to a company under subsection (15AA) in respect of a unit of post-23 July 1996 pilot plant must not exceed the qualifying pilot plant expenditure in relation to the company in respect of the unit multiplied by 1.25.
S 73B(15AB) amended and inserted by No 78 of 1996.
73B(15A) Reduction of deduction under subsection (15).
Where an eligible company has, whether before or after the commencement of this subsection, received, or become entitled to receive, any consideration in respect of the use, by another person, as mentioned in subsection (5AA), of a unit of plant, one-half of the total amount or value of that consideration shall be applied in the reduction of any deduction or deductions that has or have been allowed, or would but for this subsection be allowable, under subsection (15) from the assessable income of the company of any year of income in respect of that unit of plant.
S 73B(15A) inserted by No 167 of 1989.
73B(15B)
(Omitted by No 224 of 1992)
S 73B(15B) inserted by No 35 of 1992.
73B(16)
(Omitted by No 216 of 1991)
73B(17A) Limit on deduction for expenditure on overseas research and development activities.
An amount is not allowable as a deduction under subsection (12), (13), (14) or (15) from a company ' s assessable income of a year of income in respect of expenditure on overseas research and development activities unless the expenditure is certified expenditure.
S 73B(17A) amended by No 101 of 2006 , s 3 and Sch 2 item 244, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(17A) inserted by No 181 of 1994.
73B(18) Choice that this section not apply to plant.
An eligible company may elect that this section shall not apply in relation to a unit of plant to which this section would otherwise apply and, where an election is so made, this section does not apply in relation to that unit of plant in relation to the company.
73B(19)
(Repealed by No 41 of 1998)
73B(20) Limit on double deductions.
Subject to subsections (21), (21A) and (22), where the whole or a part of an amount of expenditure incurred by an eligible company has been allowed or is or may become allowable as a deduction under this section, that expenditure shall not be an allowable deduction, and shall not be taken into account in ascertaining the amount of an allowable deduction, from the assessable income of the company of any year of income under any other provision of this Act.
S 73B(20) amended by No 101 of 2006 , s 3 and Sch 2 item 245, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(20) amended by No 78 of 1996.
73B(20A)
To avoid doubt, subsection (20) applies despite subsection 290-10(1) of the Income Tax Assessment Act 1997 .
S 73B(20A) inserted by No 15 of 2007, s 3 and Sch 1 item 76, applicable to the 2007 - 2008 income year and later years.
73B(21)
Subsection (20) does not prevent a deduction for depreciation being allowed to an eligible company in respect of a unit of plant (other than post-23 July 1996 pilot plant) where the company has, before the end of the second year of income (in this subsection referred to as the relevant year of income ) after the year of income in which the company first used the unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, ceased to use the unit of plant exclusively for that purpose, and where, by reason of the subsequent use of the unit of plant for another purpose, such a deduction becomes allowable, the unit of plant shall be deemed to have been acquired by the company:
(a) at a cost equal to the written-down value of the unit of plant; and
(b) on:
(i) in a case where the unit of plant was used by the company exclusively for that first-mentioned purpose on the first day of the relevant year of income - that day; or
(ii) in any other case - the day on which the unit of plant was first used by the company for that first-mentioned purpose.
S 73B(21) amended by No 78 of 1996.
73B(21A)
Subsection (20) does not prevent a deduction for depreciation being allowed to an eligible company in respect of a unit of post-23 July 1996 pilot plant if the company has ceased to use the unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, and if, because of a later use of the unit for another purpose, such a deduction becomes allowable, the unit is taken to have been acquired by the company:
(a) at a cost equal to the written-down value of the unit; and
(b) on the day on which the unit was first used by the company for the other purpose.
S 73B(21A) inserted by No 78 of 1996.
73B(22)
Where deductions have been allowed to an eligible company under subsection (15) in respect of expenditure incurred by the company in the acquisition or construction of a unit of plant to which subsection (6) applies in respect of 3 years of income, subsection (20) does not prevent a deduction for depreciation being allowed to the company in respect of the unit of plant in respect of a later year of income, and where such a deduction becomes allowable, the unit shall be deemed to have been acquired by the company immediately after the end of the last year of income in respect of which a deduction was allowed to the company under this section in respect of that expenditure at a cost equal to the written-down value of the unit of plant.
73B(23) Balancing adjustments.
Where:
(a) a deduction has been allowed or is allowable to an eligible company under subsection (15) in respect of expenditure incurred in the acquisition or construction of a unit of plant (other than a unit of pilot plant to which subsection (6) applies);
(b) during a year of income, the unit of plant is disposed of, lost or destroyed;
(c) the company had used the unit of plant before it was disposed of, lost or destroyed exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and
(d) no deduction has been allowed or is allowable to the company under former section 54 of this Act or the former Division 42 (Depreciation) or Subdivision 40-B (Capital Allowances) of the Income Tax Assessment Act 1997 in respect of the unit of plant,
then:
(e) in a case where the consideration receivable in respect of the disposal, loss or destruction is less than the written-down value of the unit of plant:
(i) if the aggregate research and development amount in relation to the company in relation to the year of income is greater than $20,000 - the amount ascertained by multiplying the amount by which that written-down value exceeds that consideration receivable by 1.25; or
is allowable as a deduction from the assessable income of the company of the year of income; or
(ii) if the aggregate research and development amount in relation to the company in relation to the year of income is less than or equal to $20,000 - the amount by which that written-down value exceeds that consideration receivable,
(f) in a case where the consideration receivable in respect of the disposal, loss or destruction is greater than the written-down value of the unit of plant - so much of the excess as does not exceed the difference between the cost of the unit of plant and the written-down value of the unit of plant shall be included in the assessable income of the company of the year of income.
Note:
This subsection does not apply to an asset whose tax cost is set under Division 701 of the Income Tax Assessment Act 1997 : see section 73BAG of this Act.
S 73B(23) amended by No 101 of 2006 , s 3 and Sch 2 item 246, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(23) amended by No 16 of 2003.
S 73B(23)(d) amended by No 77 of 2001 and No 121 of 1997.
S 73B(23)(e)(i) amended by No 78 of 1996 and No 181 of 1994.
73B(24)
Where:
(a) a deduction has been allowed or is allowable to an eligible company under subsection (15) in respect of expenditure incurred in the acquisition or construction of a unit of pilot plant to which subsection (6) applies;
(b) during a year of income, the unit of plant is disposed of, lost or destroyed;
(c) the company had used the unit of plant before it was disposed of, lost or destroyed exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and
(d) no deduction has been allowed or is allowable to the company under former section 54 of this Act or the former Division 42 (Depreciation) or Subdivision 40-B (Capital Allowances) of the Income Tax Assessment Act 1997 in respect of the unit of plant,
then:
(e) in a case where the consideration receivable in respect of the disposal, loss or destruction is less than the written-down value of the unit of plant but greater than the ineligible pilot plant amount in relation to the unit of plant - the amount ascertained by multiplying the amount by which that written-down value exceeds that consideration receivable by 1.5 is allowable as a deduction from the assessable income of the company of the year of income;
(f) in a case where the consideration receivable in respect of the disposal, loss or destruction is less than the ineligible pilot plant amount in relation to the unit of plant - the amount ascertained in accordance with the formula $5,000,000 A + B, where:
is allowable as a deduction from the assessable income of the company of the year of income; or
(g) in a case where the consideration receivable in respect of the disposal, loss or destruction is greater than the written-down value of the unit of plant - so much of the excess as does not exceed the difference between the amount that would, apart from the operation of subsection (6), be the cost of the unit of plant and that written-down value shall be included in the assessable income of the company of the year of income.
S 73B(24) amended by No 101 of 2006 , s 3 and Sch 2 item 246, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(24) amended by No 77 of 2001, No 121 of 1997 and No 181 of 1994.
73B(24A)
For the purposes of paragraph (23)(c) or (24)(c), a company is not to be taken not to have used a unit of plant before it was disposed of, lost or destroyed exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities merely because of either or both of the following:
(a) another person used the unit of plant as mentioned in subsection (5AA);
(b) the company failed to use the unit of plant for the reason mentioned in subsection (5AB).
S 73B(24A) inserted by No 167 of 1989.
73B(24B)
Where:
(a) a deduction has been allowed or is allowable to an eligible company under subsection (15AA) in respect of expenditure incurred in the acquisition or construction of a unit of post-23 July 1996 pilot plant; and
(b) during a year of income, the unit of post-23 July 1996 pilot plant is disposed of, lost or destroyed; and
(c) the company had used the unit of post-23 July 1996 pilot plant before it was disposed of, lost or destroyed exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and
(d) no deduction has been allowed or is allowable to the company under former section 54 in respect of the unit of post-23 July 1996 pilot plant;
then:
(e) in a case where the consideration receivable in respect of the disposal, loss or destruction is less than the written-down value of the unit of post-23 July 1996 pilot plant:
(i) if the aggregate research and development amount in relation to the company in relation to the year of income is greater than $20,000 - the amount ascertained by multiplying the amount by which that written-down value exceeds that consideration receivable by 1.25; or
is allowable as a deduction from the assessable income of the company of the year of income; or
(ii) if the aggregate research and development amount in relation to the company in relation to the year of income is less than or equal to $20,000 - the amount by which that written-down value exceeds that consideration receivable;
(f) in a case where the consideration receivable in respect of the disposal, loss or destruction is greater than the written-down value of the unit of post-23 July 1996 pilot plant - so much of the excess as does not exceed the difference between the cost of the unit of post-23 July 1996 pilot plant and the written-down value of the unit of post-23 July 1996 pilot plant shall be included in the assessable income of the company of the year of income.
Note:
This subsection does not apply to an asset whose tax cost is set under Division 701 of the Income Tax Assessment Act 1997 : see section 73BAG of this Act.
S 73B(24B) amended by No 101 of 2006 , s 3 and Sch 2 item 246, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(24B) amended by No 16 of 2003 and inserted by No 147 of 1997.
73B(27) Amounts included in assessable income.
Where:
(a) deductions have been allowed from the assessable income of an eligible company under former subsection (17) in respect of expenditure incurred by the company in the acquisition or construction of a building or an extension, alteration or improvement to a building; and
(b) the company sells or otherwise disposes of the building, extension, alteration or improvement more than 5 years after the day on which it began to use the building, extension, alteration or improvement exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities;
the assessable income of the company of the year of income in which the sale or other disposal occurred shall include:
(c) in a case where deductions would, apart from this section, have been allowed or allowable from the assessable income of the company under former Division 10D of this Part, or under Division 43 of the Income Tax Assessment Act 1997 , in respect of the expenditure referred to in paragraph (a) - the amount ascertained by deducting from so much of the consideration receivable in respect of the sale or other disposal as does not exceed the amount of the expenditure referred to in paragraph (a) the sum of the deductions that would, apart from this section, have been allowed or allowable from the assessable income of the company under former Division 10D of this Part, or under Division 43 of the Income Tax Assessment Act 1997 , in respect of that expenditure; or
(d) in any other case - so much of the consideration receivable in respect of the sale or other disposal as does not exceed the amount of the expenditure referred to in paragraph (a).
Archived:
S 73B(27)(b) substituted by No 101 of 2006 , s 3 and Sch 2 item 248, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive .
S 73B(27) amended by No 101 of 2006 , s 3 and Sch 2 items 247 and 249, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(27)(c) amended by No 39 of 1997.
73B(27A)
Subject to subsections (27B) and (27C), where an eligible company that has incurred any expenditure on research and development activities in respect of which:
(a) a deduction under this section has been allowed or is allowable to the company; or
(b) in the case of a company whose income was exempt from tax when the expenditure was incurred - a deduction under this section would have been allowable if the company ' s income had not been so exempt from tax;
receives or is entitled to receive:
(c) an amount in respect of the results of any of the activities; or
(d) an amount attributable to the company having incurred the expenditure, including an amount that it is entitled to receive irrespective of the results of the activities;
the assessable income of the company of the year of income in which the company received or became entitled to receive that amount includes that amount.
S 73B(27A) inserted by No 35 of 1990.
73B(27B)
The reference in subsection (27A) to a company receiving or being entitled to receive an amount in respect of the results of any research and development activities includes a reference to:
(a) the company receiving or being entitled to receive an amount from the grant of access to, or the grant of a right to use, any of those results; and
(b) the company receiving or being entitled to receive an amount from the disposal of, or of an interest in, any plant (including pilot plant) or from the grant of a right to use any plant (including pilot plant) where, as a result of the disposal or grant, another person has acquired a right of access to, or a right to use, any of those results; and
(c) the company receiving or being entitled to receive an amount from the disposal of, or of an interest in, or from the grant of a right to occupy or use, a building where, as a result of the disposal or grant, another person has acquired a right of access to, or a right to use, any of those results; and
(d) the company receiving or being entitled to receive an amount from the disposal of core technology;
but does not include a reference to the company receiving or being entitled to receive an amount in consequence of the use by the company of any of those results.
S 73B(27B) amended by No 78 of 1996 and inserted by No 35 of 1990.
73B(27C)
Where a company receives or is entitled to receive an amount as mentioned in paragraph (27B)(b), (c) or (d), the amount to be included in the company ' s assessable income by virtue of subsection (27A) is:
(a) in a case to which paragraph (27B)(b) applies - only so much (if any) of the amount referred to in that paragraph as exceeds the cost to the company of acquiring or constructing the plant or pilot plant concerned; or
(b) in a case to which paragraph (27B)(c) applies - only so much (if any) of the amount referred to in that paragraph as exceeds the sum of the deductions that have been allowed or are allowable to the company under subsection (17) in relation to the building concerned; or
(c) if paragraph 27B(d) applies - only so much (if any) of the amount referred to in that paragraph as exceeds the core technology adjustment amount in relation to the core technology concerned.
S 73B(27C) amended by No 78 of 1996 and inserted by No 35 of 1990.
73B(31) Amounts worked out on arm ' s length basis.
Where:
(a) an eligible company has:
(i) incurred an amount of research and development expenditure; or
(ii) incurred an amount of core technology expenditure; or
(iii) incurred an amount of expenditure covered by subsection (14C) (ignoring paragraphs (14C)(f) and (g) ); or
(iv) incurred an amount of expenditure in the acquisition or construction of plant for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and
(b) the Commissioner is satisfied that:
(i) having regard to any connection between the company and the person to whom the expenditure was incurred and to any other relevant circumstances, the company and that other person were not dealing with each other at arm ' s length in relation to the incurring of that expenditure; and
(ii) the amount of that expenditure would have been less if the company and that other person had dealt with each other at arm ' s length in relation to the incurring of that expenditure,
so much only of that expenditure as the Commissioner considers reasonable having regard to:
(c) the connection between the company and that other person;
(d) the amount of the expenditure that would, in the opinion of the Commissioner, have been incurred by the company if the company and that other person had dealt with each other at arm ' s length in relation to the incurring of that expenditure; and
(e) such other matters as the Commissioner considers relevant;
shall be taken into account for the purposes of this section.
S 73B(31) amended by No 164 of 2007 , s 3 and Sch 11 item 9, by substituting para (a), effective 25 September 2007. For application provision, see note under s 73B(1AAA) . Para (a) formerly read:
(a) an eligible company has incurred an amount of research and development expenditure, an amount of core technology expenditure, or an amount of expenditure in the acquisition or construction of plant for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and
S 73B(31) amended by No 101 of 2006 , s 3 and Sch 2 item 250, by omitting " , a building or an extension, alteration or improvement to a building " after " construction of plant " , effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 73B(31)(a) amended by No 35 of 1992.
73B(32)
Where:
(a) an eligible company has sold or otherwise disposed of a unit of plant or a building or an extension, alteration or improvement to a building to another person; and
(b) the Commissioner is satisfied that:
(i) having regard to any connection between the company and that other person and to any other relevant circumstances, the company and that other person were not dealing with each other at arm ' s length in relation to the sale or disposal; and
(ii) the consideration receivable by the company in respect of the sale or disposal was less than the market value of the unit of plant or the building or the extension, alteration or improvement, as the case may be, immediately before the sale or disposal,
the consideration receivable by the company in respect of the sale or disposal shall, for the purposes of this section, be deemed to be the market value of the unit of plant or the building or the extension, alteration or improvement, as the case may be, immediately before the sale or disposal.
73B(33) Deductions denied if Board gives certificates.
Subject to subsection (33C), if the Board gives to the Commissioner a certificate under section 39M or 39MA of the Industry Research and Development Act 1986 in respect of particular activities in respect of which expenditure has been incurred by a company, a deduction is not allowable, and shall be deemed never to have been allowable, under this section in respect of expenditure incurred by that company in respect of those activities.
S 73B(33) amended by No 224 of 1992 and substituted by No 59 of 1988.
73B(33A)
Subject to subsection (33C), if the Board gives to the Commissioner a certificate stating that a company has failed to comply with a notice under section 39N of the Industry Research and Development Act 1986 in respect of particular activities, a deduction is not allowable, and shall be deemed never to have been allowable, under this section in respect of expenditure incurred by that company in respect of those activities.
S 73B(33A) inserted by No 59 of 1988.
73B(33B)
Subject to subsection (33C), if the Board gives to the Commissioner a certificate in relation to a company or companies under subsection 39P(4) of the Industry Research and Development Act 1986 , a deduction is not allowable under this section in respect of expenditure in relation to research and development activities referred to in the certificate that is incurred by that company or any of those companies after the day on which notice was given to the company concerned under paragraph 39P(5)(a) .
S 73B(33B) amended by No 153 of 1988 and inserted by No 59 of 1988.
73B(33BA)
Subject to subsections (33BB) and (33C), if the Board gives the Commissioner a certificate in relation to a company or companies under subsection 39PB(6) of the Industry Research and Development Act 1986 , a deduction is not allowable under this section in respect of expenditure in relation to research and development activities referred to in the certificate that is incurred by that company or any of those companies after the day stated in the certificate.
S 73B(33BA) inserted by No 147 of 1997.
73B(33BB)
Subsection (33BA) does not apply to expenditure in relation to research and development activities in respect of which a company is registered under section 39J of the Industry Research and Development Act 1986 .
S 73B(33BB) inserted by No 147 of 1997.
73B(33C)
If a certificate referred to in subsection (33), (33A), (33B) or (33BA) is revoked, this section applies, and shall be deemed to have applied, as if the certificate had not been given.
S 73B(33C) amended by No 147 of 1997 and inserted by No 59 of 1988.
73B(34) Certificates from Board bind Commissioner.
If the Board gives to the Commissioner:
(a) a certificate that:
(i) is given under section 39L of the Industry Research and Development Act 1986 ; and
(ii) states whether particular activities were research and development activities; and
(iii) relates to activities that were carried on by or on behalf of an eligible company; or
(b) a certificate that:
(i) is given under section 39LAAA of the Industry Research and Development Act 1986 ; and
(ii) states whether particular activities were Australian-centred research and development activities; and
(iii) relates to activities in relation to which an eligible company incurred expenditure;
the certificate is binding on the Commissioner for the purpose of making an assessment of the eligible company ' s taxable income of any year of income in which those activities were carried on.
S 73B(34) substituted by No 164 of 2007 , s 3 and Sch 11 item 10, effective 25 September 2007. For application provision, see note under s 73B(1AAA) . S 73B(34) formerly read:
73B(34)
If the Board gives to the Commissioner a certificate stating whether particular activities carried on by or on behalf of a specified eligible company were research and development activities, that certificate is binding on the Commissioner for the purpose of making an assessment of the company ' s taxable income of any year of income in which those activities were carried on.
S 73B(34) inserted by No 59 of 1988.
73B(34AA)
If the Board gives to the Commissioner a certificate that:
(a) is given under section 39LAAB of the Industry Research and Development Act 1986 ; and
(b) states whether particular activities were activities that would have been Australian-centred research and development activities if subsection (2BA) of this section had not been enacted; and
(c) relates to activities in relation to which an eligible company incurred expenditure;
the certificate is binding on the Commissioner for the purpose of making an assessment of the eligible company ' s taxable income of any year of income in which those activities were carried on and any later year of income.
S 73B(34AA) inserted by No 164 of 2007 , s 3 and Sch 11 item 10, effective 25 September 2007. For application provision, see note under s 73B(1AAA) .
73B(34A)
If the Board gives to the Commissioner a certificate stating whether particular activities that have been or are being carried on by or on behalf of an eligible company in respect of a project are the overseas research and development activities described in the provisional certificate given by the Board to the company under section 39ED of the Industry Research and Development Act 1986 , the certificate is binding on the Commissioner for the purpose of making an assessment of the company ' s taxable income of any year of income in which any research and development activities included in the project were carried on.
S 73B(34A) inserted by No 181 of 1994.
73B(35)
If the Board gives to the Commissioner a certificate stating whether particular technology that a specified eligible company has acquired, or has acquired the right to use, for the purpose of particular research and development activities that have been or are being carried on by or on behalf of the company is core technology in relation to those activities, that certificate is binding on the Commissioner for the purpose of making an assessment of the company ' s taxable income of any year of income in which the company incurred expenditure in acquiring that technology or the right to use that technology.
S 73B(35) inserted by No 35 of 1990.
Former s 73B(35) omitted by No 59 of 1988.
73B(36) Apportioning insurance receipts etc.
Where:
(a) an amount is receivable by a company under a policy of insurance or otherwise in respect of the destruction of property; and
(b) it is required to be determined for the purposes of this section how much of the amount receivable is receivable in respect of part of the property referred to in paragraph (a),
so much of the amount referred to in paragraph (a) as, in the opinion of the Commissioner, relates to the part of the property referred to in paragraph (b) shall be taken to be receivable by the company in respect of the part of the property referred to in paragraph (b).
Archived:
S 73B(7), (17), (25), (26), (28) to (30), (37) and (38) repealed as inoperative by No 101 of 2006 , s 3 and Sch 1 item 83, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive .
S 73B inserted by No 90 of 1986.
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