Tax Laws Amendment (Research and Development) Act 2011 (93 of 2011)

Schedule 3   Other amendments relating to new R&D incentive

Part 3   Capital allowances

Income Tax Assessment Act 1997

24   Section 40-292

Repeal the section, substitute:

40-292 Adjustments - assets used for both general tax purposes and R&D activities

(1) This section applies if:

(a) a *balancing adjustment event happens in an income year (the event year ) for an asset you *held and for which:

(i) you can deduct, for an income year, an amount under section 40-25, as that section applies apart from Division 355 and former section 73BC of the Income Tax Assessment Act 1936; or

(ii) you could have deducted, for an income year, an amount as described in subparagraph (i) if you had used the asset; and

(b) you are entitled under section 355-100 to *tax offsets for one or more income years for deductions (the R&D deductions ) under section 355-305 for the asset.

Note: This section applies in a modified way if you have deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 40-292 of the Income Tax (Transitional Provisions) Act 1997).

Section 40-290 to be applied as if use for conducting R&D activities were use for a taxable purpose

(2) In applying section 40-290 (including references in that section to the reduction of deductions under section 40-25) in relation to the asset, assume that using the asset for a *taxable purpose includes using it for the purpose of conducting the *R&D activities to which the R&D deductions relate.

Increase in amounts deductible under section 40-285

(3) If you are entitled under section 355-100 to a *tax offset for the event year in respect of deductions under Division 355 totalling at least $20,000, any amount (the section 40-285 amount ) you can deduct for the asset under section 40-285 (after applying subsection (2) of this section) for the event year is increased by:

(a) if your *aggregated turnover for the event year is less than $20 million - 1/2 of the amount worked out under subsection (5) of this section; and

(b) otherwise - 1/3 of the amount worked out under subsection (5) of this section.

Increase in amounts assessable under section 40-285

(4) Any amount (the section 40-285 amount ) that is included in your assessable income for the asset under section 40-285 (after applying subsection (2) of this section) for the event year is increased by 1/3 of the amount worked out under subsection (5) of this section.

Component of any increase in amounts deductible or assessable

(5) The amount is worked out as follows:

where:

adjusted section 40-285 amount means:

(a) if the section 40-285 amount is a deduction - the amount of the deduction; or

(b) if the section 40-285 amount is an amount included in your assessable income - so much of the section 40-285 amount as does not exceed the total decline in value.

total decline in value means the *cost of the asset less its *adjustable value.

40-293 Adjustments - partnership assets used for both general tax purposes and R&D activities

(1) This section applies to an *R&D partnership if:

(a) a *balancing adjustment event happens in an income year (the event year ) for a *depreciating asset *held by the R&D partnership and for which:

(i) the R&D partnership can deduct, for an income year, an amount under section 40-25, as that section applies apart from Division 355 and former section 73BC of the Income Tax Assessment Act 1936; or

(ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and

(b) one or more partners of the R&D partnership are entitled under section 355-100 to *tax offsets for one or more income years for deductions (the R&D deductions ) under section 355-520 for the asset.

Note: This section applies in a modified way if the partners have deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 40-293 of the Income Tax (Transitional Provisions) Act 1997).

Section 40-290 to be applied as if use for conducting R&D activities were use for a taxable purpose

(2) In applying section 40-290 (including references in that section to the reduction of deductions under section 40-25) in relation to the asset, assume that using the asset for a *taxable purpose includes using it for the purpose of conducting the *R&D activities to which the R&D deductions relate.

Increase in amounts deductible or assessable under section 40-285

(3) Any amount (the section 40-285 amount ):

(a) that the *R&D partnership can deduct for the asset under section 40-285 (after applying subsection (2) of this section) for the event year; or

(b) that is included in the R&D partnership’s assessable income for the asset under section 40-285 (after applying subsection (2) of this section) for the event year;

is increased by 1/3 of the following amount:

where:

adjusted section 40-285 amount means:

(a) if the section 40-285 amount is a deduction - the amount of the deduction; or

(b) if the section 40-285 amount is an amount included in the *R&D partnership’s assessable income - so much of the section 40-285 amount as does not exceed the total decline in value.

total decline in value means the *cost of the asset less its *adjustable value.