Under SECT 355.405 ITAA97, an entity cannot claim R&D expenditure in situations where:
(a) when an entity incurs R&D expenditure, consideration had been received, or was reasonably expected to be received:
(b) that consideration is equal to or greater than the expenditure.
The spirit of this provision is to ensure companies only receive a R&D tax benefit where they are bearing the financial risk of the underlying R&D activity.
Late last week, the ATO released a draft TR 2021/D3 on the issue of the at risk rule. The ruling includes a series of examples, and details the commissioner’s view on the relevant inputs to the provision, such as:
The ATO are taking comments on the ruling until July 2021.