Expenditure that is eligible under the R&D tax incentive

If you are an R&D entity your notional deductions may be for:

You are entitled to a notional R&D deduction in relation to expenditure described above to the extent that:

  • your expenditure is of a kind eligible for the R&D tax incentive
  • you incur expenditure during the income year (other than an amount you incur to an associate but do not pay until a later income year) on one or more registered R&D activities.

As a result, the general rule is that expenditure on R&D activities is claimable in the income year it is incurred. The exceptions to this rule are when:

  • an amount of expenditure is incurred but not paid to an associate
  • the prepayment rules apply in relation to expenditure for services to be provided over a period.

Your entitlement to a notional deduction for 'expenditure incurred' does not arise until you are registered for the income year in which the related R&D activities are conducted. However, the year of registration does not, of itself, affect the income year for which you are entitled to a notional deduction. Once registration occurs, the entitlement to the R&D tax incentive is for the income year in which the expenditure is incurred, subject to the associate and prepayment rules referred to above.

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    Last modified: 21 Apr 2015QC 25805