ATO ID 2005/358 Income tax Research and Development: ‘Aggregate research and development amount’ where core technology expenditure not deducted

August 19th, 2014

Where an eligible company chooses not to deduct an amount of core technology expenditure under subsection 73B (12A) of the Income Tax Assessment Act 1936 (ITAA 1936), is the amount included in the company’s ‘aggregate research and development amount’ as defined in subsection 73B(1) of the ITAA 1936?

Yes. The amount allowable as a deduction under subsections 73B(12) or (12A) of the ITAA 1936 for core technology expenditure is included in the ‘aggregate research and development amount’ of an eligible company.

The taxpayer is an ‘eligible company’ as defined in subsection 73B(1) of the ITAA 1936. The company incurred expenditure on ‘research and development activities’ (as defined in subsection 73B(1) of the ITAA 1936) in the year of income Y3 (2 years after the income year Y1 referred to below).

The company registered the research and development activities with the Industry, Research and Development Board (the Board) under section 39J of the Industry Research and Development Act 1986 (IR&D Act 1986).

The company has an R&D plan that complies with guidelines formulated by the Board under section 39KA of the IR&D Act 1986, as required by subsection 73B(2BA) of the ITAA 1936.

The company purchased ‘core technology’, as defined in subsection 73B(1) of the ITAA 1936, in relation to its registered ‘research and development activities’, being ‘core technology’ within the meaning of section 73B(1AB) of the ITAA 1936.

The company incurred ‘core technology expenditure’ as defined in subsection 73B(1) of the ITAA 1936 in the year of income Y1 in relation to the acquisition of that ‘core technology’.

During the year of income Y3, the company incurred research and development expenditure that was related to the ‘core technology’.

The company was entitled to claim a deduction in relation to the ‘core technology expenditure’ under section 73B(12A) of the ITAA 1936 in relation to the year of income Y3.

The company did not claim any ‘core technology’ expenditure in the year of income Y3.

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