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  • Who R&D activities are conducted for

    Entitlement to the R&D tax incentive is based, in part, on you having incurred expenditure on R&D activities that you can notionally deduct. You generally have to satisfy the conditions in section 355-210 of the ITAA 1997, which sets out for whom R&D activities can be conducted. In general, you can only claim a notional deduction and, therefore, the R&D tax incentive for expenditures on R&D activities conducted for you and not to a significant extent for some other entity (with some exceptions concerning foreign corporations – see below).

    R&D activities may be conducted for you if you conduct the activities for yourself or if another entity conducts these R&D activities for you.

    Like the 'on own behalf' rule from the former R&D tax concession, this requirement generally limits claims to the R&D tax incentive to cases where you are the person who receives the majority of benefits arising from expenditure on R&D activities. In some cases, this rule will also prevent the duplication of claims by different entities where essentially the same R&D activities are involved.

    Under subsection 355-210(1) of the ITAA 1997, you may also qualify for the R&D tax incentive if:

    In most cases, however, expenditure incurred on R&D activities conducted to a significant extent for another entity cannot be claimed by you under the R&D tax incentive (refer to subsection 355-210(2) of the ITAA 1997). Whether or not that other entity is entitled to claim the R&D tax incentive will depend on whether it satisfies the various eligibility and expenditure conditions.

    If you are claiming the R&D tax incentive for a monetary contribution you have made under the CRC program, it is not necessary to determine for whom R&D activities are conducted in order to determine eligibility to the R&D tax incentive for that expenditure.

    When determining for whom R&D activities are conducted, special rules apply if you are a partner of an R&D partnership or are part of a consolidated or MEC group.

    See also:

      Last modified: 16 Jun 2021QC 26121