Tax Laws Amendment (2007 Measures No. 5) Act 2007 (164 of 2007)

Schedule 11 Research and development

Part 3 Application and transitional provisions

80 Transitional provisions - reduced notional expenditure on foreign owned R&D

(1) This item has effect for the purposes of the application of sections 73P to 73Z (inclusive) of the Income Tax Assessment Act 1936 as amended by this Schedule, if:

(a) in its group membership period including all or part of the year of income (the initial year ) starting after 30 June 2007 and before 1 July 2008, an eligible company has incurred an amount of expenditure that is expenditure on foreign owned R&D by the eligible company in its group membership period for the year of income; and

(b) any of the 3 immediately preceding years of income were not nil expenditure years.

(2) For the purposes of paragraph 73QB(1)(b) of the Income Tax Assessment Act 1936, the eligible company is taken to have been able to deduct an amount under subsection 73B(14C) of that Act for each of the following years of income:

(a) the year of income before the initial year;

(b) the year of income 2 years before the initial year;

(3) The reduced notional expenditure on foreign owned R&D by the eligible company in its group membership period for an earlier year of income described in the second column of an item of the table is taken to be the amount set out in the third column of that item.

Reduced notional expenditure on foreign owned R&D
Item	Earlier year of income	Amount of reduced notional expenditure on foreign owned R&D
1	The year of income before the initial year	90% of the amount described in paragraph (1)(a)
2	The year of income 2 years before the initial year	80% of the amount described in paragraph (1)(a)
3	The year of income 3 years before the initial year	70% of the amount described in paragraph (1)(a)

(4) To avoid doubt, this item has effect for the purposes of the application of sections 73P to 73Z (inclusive) of the Income Tax Assessment Act 1936 as amended by this Schedule not only for the initial year but also for the next 2 years of income.

Note: This item will be relevant only to years of income assessments for which can be affected by the amount of reduced notional expenditure on foreign owned R&D for years of income before the initial year.

(5) A term that is used in this item and has a meaning given by section 73B, or any of sections 73P to 73Z (inclusive), of the Income Tax Assessment Act 1936 as amended by this Schedule has the same meaning in this item.

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