Taxation Laws Amendment (Research and Development) Act 2001 (170 of 2001)

Schedule 3   Refundable tax offset

Income Tax Assessment Act 1936

5   After section 73G

Insert:

73H Interpretation

(1) For the purposes of interpretation, sections 73I, 73J, 73K, 72L and 73M are to be read and construed as if they were part of sections 73B, 73BA and 73BH.

(2) In sections 73I, 73J, 73K, 72L and 73M:

affiliate has the meaning given by section 73M.

fixed trust estate : a trust estate is a fixed trust estate if persons have fixed entitlements to all of the income and capital of the trust estate.

gambling supply has the meaning given by section 195-1 of the GST Act.

global GST amount has the meaning given by section 195-1 of the GST Act.

person includes (as well as a company):

(a) a body politic; and

(b) a partnership; and

(c) any other unincorporated association or body of persons; and

(d) a trust estate; and

(e) a superannuation fund.

R&D group turnover has the meaning given by section 73K.

taxable supply includes a supply made in the course of carrying on research and development activities.

tax offset has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

value of the supplies : the value of the supplies a taxpayer makes in a year of income is:

(a) for taxable supplies (if any) the taxpayer made during the year in the course of carrying on a business or in the course of carrying on research and development activities - the value (as defined by section 9-75 of the GST Act) of the supplies; and

(b) for other supplies the taxpayer made during the year in the course of carrying on a business or in the course of carrying on research and development activities - the prices (as defined by section 9-75 of the GST Act) of the supplies.

73I Tax offset instead of deduction under section 73B, 73BA, 73BH or 73Y

(1) An eligible company can choose a tax offset instead of a deduction under section 73B, 73BA, 73BH or 73Y for a year of income (the tax offset year ) if it is eligible to make that choice (see section 73J).

(2) The choice must be made in the company's return of income for the tax offset year.

(3) The eligible company's tax offset for the tax offset year is 30 cents for each dollar that the company could, apart from subsection (4), deduct for that year under section 73B, 73BA, 73BH or 73Y.

(4) An eligible company cannot deduct any amount under section 73B, 73BA, 73BH or 73Y for the tax offset year if it chooses the tax offset for that year.

Note: The tax offset is subject to the refundable tax offset rules: see section 67-25 of the Income Tax Assessment Act 1997.

73J Eligibility for tax offset

(1) An eligible company is eligible to choose the tax offset for the tax offset year if:

(a) it could, apart from subsection 73I(4), deduct an amount under section 73B, 73BA, 73BH or 73Y for that year; and

(b) its aggregate research and development amount for the tax offset year exceeds $20,000; and

(c) the aggregate research and development amount for the tax offset year of the company and of taxpayers with which it is grouped (while they are grouped in that year) is not more than $1,000,000; and

(d) the R&D group turnover of the company for that year is less than $5,000,000.

Note: Section 73L sets out the taxpayers with which the company is grouped.

Exception

(2) An eligible company is not eligible to choose the tax offset for the tax offset year if an exempt entity, the affiliates of an exempt entity, an exempt entity together with its affiliates, or 2 or more exempt entities, at any time during the tax offset year, legally or beneficially own, or have the right to acquire, the legal or beneficial ownership of:

(a) interests in the company that carry between them the right to exercise, or control the exercise of, at least 25% of the voting power in the company; or

(b) interests in the company that carry between them the right to receive at least 25% of any distribution of income or capital by the company.

73K Meaning of R&D group turnover

(1) The R&D group turnover of an eligible company for a year of income is the sum of:

(a) the value of the supplies the company made in the year of income; and

(b) the value of the supplies made in the year of income by other persons while they were grouped with the company;

reduced by:

(c) the value of the supplies the company made in the year of income to persons grouped with it while they were grouped with it; and

(d) the value of the supplies persons grouped with the company made in the year of income to the company while the company was grouped with them; and

(e) the value of the supplies another person made in the year of income to a third person while the other person and the third person were grouped with the company.

(2) To the extent that the taxable supplies a person makes in a year of income includes gambling supplies, use an amount equal to 11 times the person's global GST amount for those supplies rather than the value of the supplies in working out the person's R&D group turnover.

(3) In working out the value of the supplies made by a person, disregard:

(a) any supply made to the extent that the consideration for the supply is a payment or a supply by an insurer in settlement of a claim under an insurance policy; and

(b) to the extent that a supply is constituted by a loan - any repayment of principal, and any obligation to repay principal.

73L Grouped taxpayers

(1) A person is grouped with another person at a time in a year of income if, at that time:

(a) either person controls the other person in the way described in this section; or

(b) both persons are controlled in that way by the same third person; or

(c) the persons are affiliates of each other.

(2) This section applies to a person that directly controls a second person as if the first person also controlled any other person that is directly, or indirectly by any other application or applications of this section, controlled by the second person.

Individuals, companies and fixed trusts

(3) A person controls another person if the first person, its affiliates or the first person together with the first person's affiliates:

(a) legally or beneficially own, or have the right to acquire the legal or beneficial ownership of, interests in the other person that carry between them the right to receive more than 50% of any distribution of income or capital by the other person; or

(b) if the other person is a company - legally or beneficially own, or have the right to acquire the legal or beneficial ownership of, interests in the company that carry between them the right to exercise, or control the exercise of, more than 50% of the voting power in the company.

Non-fixed trust estates

(4) A person controls a trust estate that is not a fixed trust estate if:

(a) the trustee has made a distribution, in any of the last 4 years of income (except the tax offset year) of $100,000 or more to the person, the person's affiliates or the person together with the person's affiliates; or

(b) the person, the person's affiliates or the person together with the person's affiliates:

(i) have the power, directly or indirectly, to obtain the beneficial enjoyment of any of the capital or income of the trust estate; or

(ii) are capable of gaining that enjoyment under an agreement; or

(c) a trustee of the trust estate is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the person, the person's affiliates or the person together with the person's affiliates.

Partnerships

(5) A person controls a partnership if the person, the person's affiliates or the person together with the person's affiliates have the right to more than 50% of the partnership net income, or have more than a 50% interest in assets used in the partnership business (except assets that are leased to the partnership).

(6) A partnership (the controller ) controls another person if a partner in the controller, or 2 or more partners in the controller, have the right to receive more than 50% of the partnership net income, or have more than a 50% interest in assets used in the partnership business, and:

(a) if the other person is a company - the same partner, or the same 2 or more partners, have the right to receive more than 50% of any distribution of income or capital by the company, or to exercise, or to control the exercise of, more than 50% of the voting power in the company; or

(b) if the other person is a fixed trust estate - the same partner, or the same 2 or more partners, have the right to receive more than 50% of any distribution of income or capital by the trustee; or

(c) if the other person is a trust estate that is not a fixed trust estate - a condition in a paragraph of subsection (4) is satisfied for the same partner, or the same 2 or more partners in relation to the trust estate; or

(d) if the other person is a partnership - the same partner, or the same 2 or more partners, have the right to receive more than 50% of the partnership net income, or have more than a 50% interest in assets used in the partnership business, of the partnership.

73M Meaning of affiliate

(1) A person is an affiliate of another person if the person acts, or could reasonably be expected to act, in accordance with the other person's directions or wishes, or in concert with the other person, in relation to the affairs of the person's business or research and development expenditure.

(2) Another partner in a partnership in which a person is a partner is not the person's affiliate only because the partner acts, or could reasonably be expected to act, in concert with the person in relation to the affairs of the partnership.