Feedstock expenditure

A feedstock adjustment is an amount you include in your assessable income. It applies when you obtain an R&D tax incentive offset for your feedstock expenditure incurred on R&D activities, where those activities also produce tangible products for supply to someone else, or to be applied to your own use (other than in transforming such products for supply).

For the purposes of the feedstock adjustment, supply or use of the product by your affiliate, or an entity of which you are an affiliate, or a connected entity is taken to be supply or use of the product by you and will attract a feedstock adjustment.

The feedstock adjustment applies to expenditure on:

  • goods or materials (feedstock inputs) that are transformed or processed during R&D activities in producing one or more tangible products (feedstock outputs)
  • energy input directly into that transformation or processing.

A feedstock adjustment may also apply for amounts claimed for the decline in value of assets used in acquiring or producing feedstock inputs.

The feedstock provisions apply to both core R&D activities and supporting R&D activities that transform or process feedstock inputs. The provisions are not confined to mass production activities.


Although this type of expenditure may not form part of any feedstock adjustment in the year it is incurred, it will represent expenditure on feedstock inputs and should be recorded separately from the other expenditure types.

Where a feedstock adjustment is triggered, you must include an amount in your assessable income. This may be in the current or future years, depending on when the output is sold or applied.

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Contributions under the CRC program

Generally, you must incur at least $20,000 worth of expenditure on R&D activities to be eligible for a notional deduction under subsection 355-100(1)External Link of the ITAA 1997. Subsection 355-100(2) provides an exception to this requirement for monetary amounts contributed under the CRC program, where all other eligibility criteria have been met.

You are entitled to a notional deduction for expenditure incurred as a monetary contribution under the CRC program, if you are registered for the R&D activities on which the contribution is spent. The notional deduction does not arise until you are registered, which in some cases could be for an income year after you incur the contribution. However, the notional deduction for the monetary contribution still applies to the income year in which the contribution was incurred.


You are not entitled to a notional R&D deduction for any expenditure the CRC incurs from Commonwealth funding.

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To prevent double benefits in respect of the same amounts, you cannot obtain a notional R&D deduction for:

  • a monetary contribution made to a CRC, other than under the specific rule about monetary contributions to a CRC, and
  • the decline in value of an R&D depreciating asset whose cost has been incurred under the CRC program.

Where you incur a non-monetary contribution but the contribution is in money's worth (for example an employee's time or plant used in the R&D activities), that contribution should be valued and this value will also constitute expenditure incurred by you. The normal R&D tax incentive provisions apply in these circumstances and any notional deduction is subject to the rules in Subdivision 355-DExternal Link of the ITAA 1997, including the requirement that at least $20,000 of expenditure be incurred.


Company A incurs $100,000 of expenditure as a monetary contribution under the CRC program in the year ending 30 June 2012. The CRC does not spend Company A's contribution on an R&D activity until the year ending 30 June 2013. To be eligible for a notional deduction for this amount, Company A must register the R&D activity for the year in which the R&D activity is conducted (the income year ending 30 June 2013). Company A's registration of the relevant R&D activity will trigger eligibility (provided all other criteria are also met) for Company A to have a notional deduction equal to the amount it incurred to the CRC, in the year ending 30 June 2012

End of example


    Last modified: 25 Oct 2016QC 25805