Expenditure on overseas activities
To claim a notional deduction for overseas R&D activities under Division 355External Link of the ITAA 1997 you must first get a positive overseas finding from Innovation Australia. Sections 28CExternal Link and 28DExternal Link of the IR&D Act provide information on findings about activities to be conducted outside Australia, including conditions you must meet.
You can only claim expenditure on an R&D activity carried out overseas if the activity is registered and is covered by a finding that it meets the following four conditions:
- the overseas activity is covered by an advance finding that the activities are eligible R&D activities
- the overseas activity has a significant scientific link to Australian core activities
- the overseas activity cannot be conducted in Australia or the external territories for a reason listed in the legislation
- the expenditure on the overseas activity and certain other overseas activities is less than the expenditure on the related core R&D activities and supporting R&D activities conducted in Australia.
An overseas finding is in force from the start of the income year in which the application is made.
Incidental expenditure on overseas activities
We will accept notional deductions of minor amounts of expenditure on overseas R&D activities as deductible without an overseas finding from Innovation Australia. The kind of expenditures accepted for this purpose are those on overseas R&D activities that are insignificant in the context of an Australian R&D project.
An example of incidental expenditure is expenditure incurred by an R&D entity in sending R&D staff overseas to observe techniques used in other countries or attend relevant seminars, where those activities are directly related to the company's core R&D activities in Australia, and the amount of the expenditure is very minor in relation to the total expenditure on those activities.
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For more information about conducting R&D activities outside Australia, refer to the AusIndustryExternal Link website:
End of further information
- Research and development tax incentive overview
- R&D tax incentive - overseas R&D
- R&D tax incentive - guide to findings.