You can only claim a notional deduction under the R&D tax incentive to the extent that the expenditure has been incurred on R&D activities. In the case of expenditure to an associate it must be paid within the income year you want to claim the R&D tax offset in). The words 'to the extent that' mean that a method of apportionment may be required if you cannot specifically identify the value of expenditure incurred on R&D versus non-R&D activities.
There are many ways and methods you can use to apportion your expenditure. It is up to you to determine the most reasonable basis with the information you have at the time. You need to take into account your circumstances, accounting methods and the type of expenditure.
For some types of expenditure incurred on R&D activities it may be difficult to examine each invoice received and calculate the amount of expenditure applicable to the R&D activity. You may need to apportion the expenses to achieve the best degree of accuracy. The method you chose to use will depend on the internal accounting procedure adopted by your company and the type of expense involved.
Under the R&D tax incentive, it is not accepted that one apportionment method or formula will be suitable for all expenditure types you may have. You need to consider each expenditure type separately to ensure that the method of apportionment you have used is reasonable and provides the most accurate measure of R&D expenditure.
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To obtain certainty about the method of apportionment you have used, you can apply for a private binding ruling. Getting help provides information about different ways we can help.
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