Income Tax (Transitional Provisions) Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS

Division 355 - Research and Development

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History

Div 355 inserted by No 93 of 2011, s 3 and Sch 4 item 15, effective 8 September 2011.

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

Schedule 4 - Application, savings and transitional provisions

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

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

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

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

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

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

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

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

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

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

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

(b) any state of affairs existing; or

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

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

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

Note:

Examples of things covered by this subitem are as follows:

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

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

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

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

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

(b) that relates to:

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

(ii) a state of affairs existing; or

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

Examples of things covered by this subitem are as follows:

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

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

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

(a) has not begun; or

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

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

Subdivision 355-E - Balancing adjustments for decline in value deductions for assets used in R & D activities

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SECTION 355-320 Balancing adjustment - assets only used for R & D activities

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R & D entity has old law R & D decline in value deductions

355-320(1)
This section applies to an R & D entity if:

(a) a balancing adjustment event happens in an income year (the event year ) commencing on or after 1 July 2011 for an asset held by the R & D entity; and

(b) the R & D entity cannot deduct an amount under section 40-25 of the Income Tax Assessment Act 1997 (the new Act ), as that section applies apart from:

(i) Division 355 of that Act; and

(ii) former section 73BC of the Income Tax Assessment Act 1936 (the old Act );

for the asset for an income year; and

(c) either or both of the following subparagraphs apply:

(i) the R & D entity can deduct (the old law deductions ) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset;

(ii) the R & D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions ) under those former sections for one or more income years for the asset; and

(d) the R & D entity is registered under section 27A of the Industry Research and Development Act 1986 for one or more R & D activities for the event year; and

(e) if Division 40 of the new Act applied as described in subsection (2) of this section:

(i) the R & D entity could deduct for the event year an amount under subsection 40-285(2) of that Act for the asset and the balancing adjustment event; or

(ii) an amount would be included in the R & D entity ' s assessable income for the event year under subsection 40-285(1) of that Act for the asset and the balancing adjustment event.

Note 1:

This section applies even if the R & D entity is entitled under section 355-100 of the new Act to tax offsets for one or more income years for deductions under section 355-305 of that Act for the asset.

Note 2:

Section 40-292 of this Act may apply if paragraph (c), but not paragraph (b), of this subsection is satisfied.

View history note

Changed application of Division 40

355-320(2)
For the purposes of paragraph (1)(e), assume that Division 40 of the new Act applied with the changes described in section 355-310 of that Act, but with these changes to that section.

Changes to be made to section 355-310 of the new Act
Item	For a reference in section 355-310 to …	substitute a reference to …
1	section 355-315	this section
2	the purpose of conducting one or more of the R & D activities to which the R & D deductions (within the meaning of that section) relate	both: (a) the purpose of conducting one or more of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; and (b) the purpose of conducting one or more of the R & D activities to which the new law deductions (if any) relate

Deduction

355-320(3)
If the R & D entity could deduct for the event year an amount under subsection 40-285(2) of the new Act for:

(a) the asset; and

(b) the event;

if Division 40 of that Act applied as described in subsection (2) of this section, the R & D entity is taken to be able to deduct under subsection 355-315(2) of the new Act that amount for the event year.

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Amount to be included in assessable income

355-320(4)

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If an amount (the section 40-285 amount ) would be included in the R & D entity ' s assessable income for the event year under subsection 40-285(1) of the new Act for the asset and the event if Division 40 of that Act applied as described in subsection (2) of this section, the sum of:

(a) that amount; and

(b) the following amount;

is taken to be included in the R & D entity ' s assessable income for the event year under subsection 355-315(3) of the new Act:

where:

adjusted section 40-285 amount
means so much of the section 40-285 amount as does not exceed the total decline in value.

old law 1.25 rate deductions
means the sum of the R & D entity ' s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions.

total decline in value
means the asset ' s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2).

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Application of Division 355

355-320(4A)

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In applying Division 355 of the new Act in relation to the asset for the income year, if the R & D entity is entitled under section 355-100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions ) under section 355-305 for the asset, the R & D entity is taken to have

(a) if an amount is taken to be included in the R & D entity ' s assessable income for the event year as mentioned in subsection (4) of this section - a clawback amount under section 355-446 of the new Act for the income year equal to the amount mentioned in subsection (4B) of this section; or

(b) if the R & D entity is taken to be able to deduct an amount as mentioned in subsection (3) of this section - a catch up amount under section 355-465 of the new Act for the income year equal to the amount of that deduction.

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355-320(4B)

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The amount is the following:

Adjusted section 40-285 amount	×	Sum of new law deductions
		Total decline in value

where:

adjusted section 40-285 amount
means so much of the section 40-285 amount as does not exceed the total decline in value.

total decline in value
means the asset ' s cost, less its adjustable value, worked out under Division 40 of the new Act as it applies as described in subsection (2) of this section.

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Normal rules do not apply for the asset and the event

355-320(5)
Neither of the following sections:

(a) section 355-315 of the new Act;

(b) former section 73BF of the old Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011 );

to the extent that they would otherwise apply apart from this section to the R & D entity for the event, do so apply to the R & D entity for the event.

Note 1:

Section 355-315 of the new Act would otherwise apply for the event in a case where the R & D entity had new law deductions.

Note 2:

Former section 73BF of the old Act would otherwise apply for the event in respect of the old law deductions.

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