R&D expenditure paid to your associate in your claim year
If you incur an amount of expenditure to an associate and you pay the amount in the same year, you can claim a notional deduction for that amount in that year (provided you meet all other eligibility requirements for the R&D tax incentive).
Paying an amount to an associate can include making a constructive payment. A constructive payment is where you apply or deal with the amount on their behalf or as they direct. Therefore, in working out whether you have paid an amount to another entity, and when the payment is made, the amount is taken to be paid to the other entity when you apply or deal with the amount in any way on the other's behalf, or as the other directs.
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In broad terms, associates are those entities which, by reason of family or business connections, might appropriately be regarded as being associates of a particular entity.
Some examples of an associate of a company, other than a company in the capacity of trustee, include:
- a partner of the company or a partnership in which the company is a partner
- a trustee of a trust estate under which the company or associate benefits
- another entity (including a natural person) that, acting alone or with another entity or entities, sufficiently influences the company
- an entity (including a natural person) that, either alone or together with associates, holds a majority voting interest in the company
- a second company that is sufficiently influenced by the company or the company's associate
- a second company in which a majority voting interest is held by the company or the company's associate.
If you do not pay the amount until a later income year, you can choose to either:
- claim a deduction under the normal income tax provisions - for example, the general deduction provision, section 8-1External Link of the ITAA 1997 - for the income year in which the amount was incurred. This choice (made in your return or as an amendment) must be made by the time you lodge your return for the income year before the one in which the payment is made
- claim a notional R&D deduction in the year you make the payment.
You must make the choice by the time you lodge your income tax return for the most recent income year, before the income year in which you paid the amount. This choice cannot be reversed, for example, by later requesting an amendment of the assessment to disallow the deduction claimed.