Records to show you receive the major benefit from the R&D activities

Expenditure on R&D activities conducted to a significant extent for another entity will not be notionally deductible by you (these amounts will instead be deductible by the entity receiving the major benefit) under the R&D tax incentive. Some special rules and exceptions apply if the R&D activities are conducted for associated foreign corporations or by an R&D partnership.

Your eligible expenditure must be on R&D activities conducted for yourself and not (to a significant extent) for some other entity. This is intended to limit claims to cases where you receive the major benefit from your expenditure on those activities. It will also prevent duplication of claims by different entities where essentially the same R&D activities are involved.

Whether an R&D activity is conducted for you is a matter of fact. You need to work out if the activity is conducted, in substance, to provide the majority of knowledge benefits resulting from the activity to you.

If someone is conducting R&D activities (in whole or part) for you under contract, or you are under contract to produce a specific product for someone else (and R&D activities will be required to meet the contract), it is particularly important to ensure you maintain records to support this requirement.

Further information

For more information about determining who receives the major benefit from the activities on which you have incurred expenditure, refer to Research and development tax incentive - for whom are the R and D activities conducted?

End of further information
    Last modified: 19 Jun 2012QC 26104