Research & development tax concession: instructions for Excel spreadsheet version 2005

About these instructions

These instructions will help you use and complete the Excel spreadsheet version of the Research and development tax concession schedule 2005 (the R&D schedule) and the research and development (R&D) deduction items on the Company tax return 2005.

When we refer to 'you' in these instructions, we are referring to the person responsible for completing the schedule.

This publication is NOT a guide to income tax law. Please get help from the Tax Office or a recognised tax adviser if you feel this publication does not fully cover your circumstances.

Other resources that you may need to refer to are listed in 'What to read/do next' and in each section of these instructions.

Abbreviations and unfamiliar terms

For an explanation of any terms used in these instructions that are unfamiliar to you, see the 'list of definitions' and the 'list of abbreviations'.

Overview

These instructions will help you use and complete the Excel spreadsheet version of the Research and development tax concession schedule 2005 (the R&D schedule), which in turn will help you complete the deduction items for research and development (R&D) expenditure on the Company tax return 2005.

For more information about the R&D tax concession, see the joint AusIndustry/Tax Office publication Guide to the research & development tax concession.

Who must complete an R&D schedule?

You must complete and lodge an R&D schedule if you make a claim on your company tax return for R&D activities under the R&D tax concession. These activities are referred to in sections 73B to 73Z of the Income Tax Assessment Act 1936 (ITAA 1936).

Who can claim the R&D tax concession?

You may be entitled to claim the concession for your company if it is:

an eligible company that has registered its research and development activities with the Industry, Research and Development Board (IRDB) through AusIndustry for the income year ended 30 June 2005, or

the head company of a consolidated group where at least one of the subsidiary companies in the group is an eligible company and is registered with the IRDB (section 73BAB of ITAA 1936).

An eligible company is a body corporate incorporated under a law of the Commonwealth or of a state or territory (subsection 73B(1) of ITAA 1936).

An eligible company that incurs expenditure as a trustee or nominee cannot claim the concession unless it is a trustee of a public trading trust (subsection 73B(3) of ITAA 1936).

You can only claim the tax concession for expenditure on eligible R&D activities. The IRDB and AusIndustry determine whether activities are eligible R&D activities.

You must lodge an application for registration of R&D activities with the IRDB within 10 months of the end of the income year.

You must register before you make a claim on the company's tax return. If your company chooses to claim the R&D tax offset, it must do so in its return of income (which includes the R&D schedule) and it must be registered at that time.

Who administers the R&D tax concession?

The R&D tax concession is jointly administered by AusIndustry, part of the Department of Industry, Tourism and Resources (DITR) and the Tax Office.

For information about how to register for the R&D tax concession and about what R&D activities qualify for the concession:

• visit the AusIndustry website
• phone the AusIndustry hotline on 13 28 46

For information about claiming the R&D tax concession go to our Research and development tax concession homepage.

Before you complete the schedule

Before you start to use the Excel spreadsheet version of the Research and development tax concession schedule 2005 (R&D schedule), you will need to make certain calculations and complete certain parts of the company tax return. Read through the points below. Although not exhaustive, they list important information.

Five items on the Company tax return 2005 relate to the R&D tax concession:

Page 2 item 7 Reconciliation to taxable income or loss

• D Accounting expenditure in item 6 subject to R&D tax concession
• L R&D tax concession - not including label M
• M Incremental R&D (additional 50%) deduction
• Y R&D tax offset, if chosen

Page 4 Calculation statement

• U R&D tax offset.

General

1. At item 7 Reconciliation to taxable income or loss on the Company tax return 2005, complete D Accounting expenditure in item 6 subject to R&D tax concession. For information about how to complete this item, see 'Preliminary calculation - label D'.
2. Calculate your aggregate R&D amount:

• to ensure the company has incurred the required amount - that is, more than $20,000), and
• to determine whether your expenditure qualifies for the 100% or 125% deduction under subsections 73B (14) and (15) and section 73BA of Income Tax Assessment Act 1936 (ITAA 1936).

3. Calculate how much has been spent in each category that qualifies for a deduction under section 73B of ITAA 1936.

Consolidated groups

The amounts used as the base amounts in the calculation of the R&D tax concession deductions for consolidated groups must have been worked out on a consolidated basis, with all intra-group transactions eliminated. They must not be calculated on an aggregated basis, simply aggregating each group company's expenditure.

Only one R&D schedule is required for a consolidated group.

Clawback

Section 73C of ITAA 1936 operates to 'claw back' the benefits of the R&D tax concession for companies that have received a government grant - other than a cooperative research centre (CRC) program grant - for the same project. If you need to make any clawback calculations, you must make them in accordance with section 73C.

You will need to determine whether the company (or any company required to be grouped with it) received, or was entitled to receive, a grant or recoupment in respect of any amounts claimed under the R&D tax concession.

	To find out how the clawback rules operate where a subsidiary leaves or joins a consolidated group, see sections 73BAE of ITAA 1936 and section 701-5 of Income Tax Assessment Act 1997 (ITAA 1997).
	If clawback applies, you may find it useful to read 'Important notes on Part A of the schedule' and 'PART C Government grants and recoupments - other than CRC program grants'.

Prepayments

Adjust the amount of expenditure incurred in accordance with the prepayment provisions in sections 82KZL to 82KZMF of ITAA 1936 and subsection 73B(11) of ITAA 1936.

Intra-group mark-up

The intra-group mark-up provisions are covered in subsections 73B(14AA) - (14AD) of ITAA 1936. You will need to adjust the amount of expenditure you claim according to those provisions.

Overseas expenditure

Expenditure on overseas R&D activities is covered in section 39ED of the Industry Research and Development Act 1986. Companies must have an overseas provisional certificate from the IRDB before they can claim overseas expenditure.

Depreciating assets/plant

Determine amounts that are available for deduction as depreciation under sections 73BH, 73BJ, 73BA and 73BC of ITAA 1936 and Division 40 of ITAA 1997.

For more information, see the Guide to depreciating assets 2005 (NAT 1996-6.2005).

Core technology

Determine how much of your core technology expenditure is deductible in accordance with subsections 73B(12)-(12B) of ITAA 1936.

Incremental expenditure

Determine whether your incremental expenditure makes you eligible for the incremental tax concession under section 73Q of ITAA 1936.

Grouping rules

Determine which entities are in the company group in accordance with sections 73L, 73M and 73R of ITAA 1936.

A head company of a consolidated group will also need to consider these provisions (for example, where it is grouped with other entities with less than 100% control or ownership).

Expenditure that is not at risk

Apply section 73CA of ITAA 1936 to any expenditure for which the company was not at risk or section 73CB of ITAA 1936 to any expenditure incurred to a tax-exempt body which was not at risk.

Roll-over relief

See sections 73E, 73F and 73G of ITAA 1936 to determine expenditure that qualifies for roll-over relief.

GST

Adjust expenditure amounts to take account of any entitlement you have to GST credits. See Division 27 of ITAA 1997.

How to complete the schedule

Complete all items on the schedule that apply to your company, including yes/no items. If an item or label does not apply, leave it blank.

Original or amended claim

If the company has already lodged a schedule for the 2005 income year, enter X in the box at the right of Amended claim. If it hasn't, enter X in the box at the right of Original claim.

Company name

Enter the name of the company. The name entered on the schedule must be the same as that shown on the company's tax return.

Tax file number (TFN)

Enter the tax file number (TFN) of the company.

AusIndustry/IRDB registration number

Enter the AusIndustry/Industry Research and Development Board (IRDB) registration number issued to the company for this income year for registered activities.

If your company is the head entity of a consolidated group and it is not registered with AusIndustry for the current year, enter the registration number of any one company in the consolidated group that has been registered.

Signature as prescribed in tax return

The person who is required to sign and who signs the company tax return must also sign the Research and development tax concession schedule 2005 (R&D schedule).

Australian business number (ABN)

Enter the company's Australian business number (ABN).

Preliminary calculation - D

On the R&D schedule at Preliminary calculationD enter the write-back of R&D accounting expenditure for the amounts you have included at the appropriate expenditure labels at item 6 Calculation of total profit or loss on the Company tax return 2005.

The amount entered at D on the R&D schedule must be the same as the amount entered at D item 7 Accounting expenditure in item 6 subject to R&D tax concession on the company tax return.

If you have not included expense amounts for R&D deductions at item 6Calculation of total profit or loss on the company tax return - if, for example, those amounts are capitalised - enter zero (0) at D.

For consolidated groups

If aggregated expenditure has been used for accounting R&D expenditure under item 6 on the company tax return, add back the full amount of this aggregated expenditure at D item 7 on the company tax return.

PART A Calculation of R&D deduction

Important notes - Part A, items 1-14

For Part A items 1 to 14, note the following:

Base amount column

The base amount for each item is the amount of the deduction available for the particular classification of expenditure BEFORE any additional concessional component is added. The three columns to the right of the 'Base amount' column allocate the base amount to three parts according to the level of any concession that applies (100%, 125% and 150%).

Do not add in the amount of the additional concession in these labels. This is automatically calculated at item 16.

Where there is a shaded area instead of a box, a level of concession does not apply to that expenditure.

Claimable at 100% column

The 'Claimable at 100%' column includes, but is not limited to, expenditure that:

• clawback applies to (section 73C of ITAA 1936)
• represents an intra-group mark-up (subsections 73B(14AA)-(14AD) of ITAA 1936), or
• is subject to the operation of section 73CA or 73CB of ITAA 1936 (expenditure not at risk or expenditure incurred to tax-exempt bodies which is not at risk).

Claimable at 125% column

Include in the 'Claimable at 125%' column all amounts eligible as a deduction at the rate of 125%.

Claimable at 150% column

The 'Claimable at 150%' column applies in very limited circumstances. It applies to expenditures covered under the 1996 transitional rules which applied when the concessional rate changed from 150% to 125%.

Incremental tax concession deduction

Part A of the schedule does not calculate any incremental tax concession deduction (50% Premium). Such a deduction is determined at Part D.

Item 1 Contracted expenditure - RRA

Contracted expenditure is expenditure on work carried out by a registered research agency (RRA) on behalf of an eligible company. The RRA must not be an associate of the eligible company, and must have been registered under section 39F of the Industry Research and Development Act 1986 (IRADA 1986) when the expenditure was incurred. The RRA must have been registered in respect of the class of R&D activities on which the expenditure was incurred.

At item 1 enter expenditure on items included in paragraph (c) of the definition of 'contracted expenditure' under subsection 73B(1) of Income Tax Assessment Act 1936 (ITAA 1936). These amounts should be adjusted as required under subsection 73B(11) of ITAA 1936 for advance and accelerated expenditure.

Expenditure qualifies as contracted expenditure only if, at the time the expenditure was incurred, the eligible company was capable of using, or had formulated a plan to use, any results of the R&D directly in connection with a business that the company carried on or proposed to carry on (subsection 73B(1B) of ITAA 1936).

At A enter the total amount of contracted expenditure that is RRA incurred (the base amount).

At B enter any amount of the contracted expenditure claimable at 100%.

At C enter any amount of the contracted expenditure claimable at 125%.

At D enter any amount of the contracted expenditure claimable at 150%.

The total of the amounts at B, C and D must equal the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreasheet.

More information

For more information, see:

• subsection 73B(1) and 73B(1B) of ITAA 1936
• Taxation Ruling IT 2451
• Taxation Ruling IT 2442.
• Guide to the R&D tax concession

Item 2 Salary expenditure

At item 2 enter the amount of salary expenditure for employees who are actually carrying out an eligible research and development (R&D) activity (as defined in subsection 73B(1) of Income Tax Assessment Act 1936 (ITAA 1936), including:

• salaries, wages, allowances, bonuses, overtime payments, penalty rate payments, annual leave, sick leave and long service leave, and
• on-costs such as contributions to a superannuation fund, premiums for workers' compensation insurance and payroll tax.

This item does not include:

• salary expenditure incurred in the construction of R&D plant, depreciating assets, structural improvements or buildings
• salary expenditure of R&D support staff not directly connected with the research activity - include those at item 3 Other R&D expenditure, and
• salary expenditure claimed that is to be adjusted in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936).

At E enter the total R&D salary expenditure incurred (the base amount).

At F enter any amount of the total R&D salary expenditure claimable at 100%.

At G enter any amount of the total R&D salary expenditure claimable at 125%.

The total of the amounts at F and G must equal the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsection 73B(1) of ITAA 1936
• Taxation Ruling IT 2552
• Taxation Ruling IT 2442
• Taxation Ruling TR 2002/1
• Guide to the R&D tax concession

Item 3 Other R&D expenditure

At item 3 enter other research and development (R&D) expenditure incurred directly for R&D activities carried on by or on behalf of the company. (See paragraph (c) of the definition of 'research and development expenditure', subsection 73B(1) of Income Tax Assessment Act 1936 (ITAA 1936.).

Do NOT include amounts to be shown at item 4 Contract - other or item 5 Plant leasing.

Taxation Ruling IT 2552 states that overhead and administrative expenditure is directly for R&D activities if:

• the eligible R&D activities contributed to all or an identifiable part of the expenditure being incurred, or
• the conduct of eligible R&D activities by the company would be materially impaired if the expenditure was not incurred.

Adjust the amount of other R&D expenditure claimed in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936).

'Other R&D expenditure' does NOT include:

• core technology expenditure
• interest expenditure
• feedstock expenditure (show eligible feedstock expenditure and residual feedstock expenditure as separate items)
• expenditure incurred acquiring or constructing plant, pilot plant or a building, or extending, altering or making improvements to a building, and
• expenditure incurred acquiring or constructing a section 73BA of ITAA 1936 depreciating asset.

At H enter the total amount of other R&D expenditure incurred, excluding any amounts to be entered at items 4 or 5 (the base amount).

At I enter any proportion of other R&D expenditure claimable at 100%.

At J enter any proportion of other R&D expenditure claimable at 125%.

At K enter other R&D expenditure claimable at 150%.

The total of the amounts at I, J and K must equal the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsection 73B(1) of ITAA 1936
• Taxation Ruling IT 2451
• Taxation Ruling IT 2442
• Taxation Ruling IT 2552 and IT 2552A
• Guide to the R&D tax concession

Item 4 Contract - other

Item 4 is a component of paragraph (c) of the definition of research and development expenditure in subsection 73B(1) of Income Tax Assessment Act 1936 (ITAA 1936) 'Other R&D expenditure'. You will need to show any expenditure incurred under a contract to another party (other than a registered research agency (RRA)) that is directly for research and development (R&D) activities carried on by or on behalf of the company.

This item excludes:

• contracted expenditure carried out by an RRA (enter this at item 1), and
• expenditure under a contract that is, in substance, for the acquisition of plant.

Adjust the amount of 'contract other' expenditure you claim in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936). Subsection 73B(9) of ITAA 1936 does not allow a deduction for expenditure incurred on research and development activities on behalf of any other person.

If the payment is to another group member, adjust the amount of expenditure claimed in accordance with the intra-group mark-up provisions (subsections 73B(14AA)-(14AD) of ITAA 1936).

At N enter the total amount of contract other expenditure incurred (the base amount).

At O enter any amount of the contract other expenditure claimable at 100%.

At P enter any amount of the contract other expenditure claimable at 125%.

At Q enter any amount of the contract other expenditure claimable at 150%.

The total of the amounts at O, P and Q must equal the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsection 73B(1) of ITAA 1936
• Taxation Ruling IT 2451
• Taxation Ruling IT 2442
• Guide to the R&D tax concession

Item 5 Plant leasing

Item 5 is a component of paragraph (c) of the definition of research and development expenditure in subsection 73B(1) of Income Tax Assessment Act 1936 (ITAA 1936). You will need to show any expenditure incurred in the hire or leasing of an item of plant that is directly for research and development (R&D) activities carried on by or on behalf of the company.

Adjust the amount of plant leasing expenditure claimed in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936).

At R enter the total amount of plant leasing expenditure incurred (the base amount).

At S enter any amount of the plant leasing expenditure amount claimable at 100%.

At T enter any amount of the plant leasing expenditure amount claimable at 125%.

At U enter any amount of the plant leasing expenditure claimable at 150%.

The total of the amounts at S, T and U must equal the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsection 73B(1) of ITAA 1936
• Taxation Ruling IT 2442
• Guide to the R&D tax concession

Item 6 Eligible feedstock expenditure

Feedstock expenditure items

To find out how much to include at the feedstock expenditure items 6 and 14, first determine the following amounts.

• Feedstock expenditure - expenditure incurred in acquiring or producing materials or goods processed or transformed by the company in R&D activities. It includes expenditure on energy directly input into processing or transforming these materials or goods.
  
• Feedstock input - feedstock expenditure for materials or goods that were processed or transformed in research and development (R&D) activities during the year of income.
  
• Feedstock output - the sales proceeds or value of any products obtained during the year of income from processing or transforming the materials or goods that were feedstock expenditure. It is either the amount received or receivable for the products sold in arm's length transactions or, if not sold, or not sold in an arm's length transaction, the amount that would have been received if they had been sold in an arm's length transaction.

Include at item 6 the amount of eligible feedstock expenditure as defined in subsections 73B(1) and (1A) of Income Tax Assessment Act 1936 (ITAA 1936) for related research and development (R&D) activities. It is the excess of the feedstock input over the feedstock output for the related activities, in the year of income. The eligible feedstock expenditure will attract the additional 25% concession component.

If the company has eligible feedstock expenditure, include this amount at item 6 enter the remainder of feedstock input at item 14 as residual feedstock expenditure.

Adjust the amount of eligible feedstock expenditure claimed in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936).

At V enter the total amount of eligible feedstock expenditure (the base amount).

At W enter any amount of eligible feedstock expenditure claimable at 100%.

At X enter any amount of the eligible feedstock expenditure claimable at 125%.

The total of the amounts at W and X must equal the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsection 73B(1)of ITAA 1936
• subsection 73B(1A) of ITAA 1936
• Guide to the R&D tax concession

Item 7 Plant/pilot deductions - pre-29 January 2001

Item 7 includes plant and pilot plant deductions and balancing loss adjustments for a unit of plant acquired under a contract entered into, or that commenced construction, before 12pm (midday) Australian Eastern Standard Time on 29 January 2001.

Add the relevant amounts together, as explained below, and show them at the appropriate labels. If the company has a balancing profit under paragraphs 73B(23)(f) or 73B(24)(g) of Income Tax Assessment Act 1936 (ITAA 1936), include this profit amount at item 8.

Each of these types of deduction is considered separately in the following paragraphs and the amounts are to be added together.

Deductions for plant expenditure

Include at item 7 one-third of the amount of 'qualifying plant expenditure' for the year of income (subsections 73B(4) and (5) of ITAA 1936). To have an amount of qualifying plant expenditure, the company must, at the time it incurred the expenditure on the unit of plant, have intended to use the unit of plant exclusively for research and development (R&D) activities, for at least an initial period. (Plant expenditure is defined in subsection 73B(1) of ITAA 1936). The company must also have satisfied the actual exclusive-use tests contained in subsections 73B(4) and (5) of ITAA 1936. The company cannot claim an amount as qualifying plant expenditure if R&D activities ceased during the year of income (subsection 73B(5) of ITAA 1936).

If these conditions are satisfied, one-third of the amount of qualifying plant expenditure forms the basis of the deduction allowable (subsection 73B(15) of ITAA 1936).

If another person uses the unit of plant exclusively for R&D activities, and that person has paid or must pay a consideration to the owner of the unit of plant, reduce the deductible plant expenditure by one-half of the consideration received (subsection 73B(15A) of ITAA 1936).

Adjust the amount of plant deductions claimed in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936).

If the company can claim plant expenditure under subsection 73B(15) of ITAA 1936, and the tax cost is 'set' for that plant asset because the company joins a consolidated group (see section 701-10 and 701-55 of ITAA 1997), you may need to make an adjustment to any deduction allowable for the decline in value of that asset (ITAA 1936). (See section 73BAF of ITAA 1936.)

At A enter one-third of qualifying plant expenditure, if a deduction for that expenditure is allowable under subsection 73B(15) of ITAA 1936, as part of the total net amount to be entered at this label (the base amount).

At B enter that part of the amount at A claimable at 100%, as part of the total net amount to be entered at this label.

At C enter that part of the amount at A claimable at 125%, as part of the total net amount to be entered at this label.

At D enter that part of the amount at A claimable at 150%, as part of the total net amount to be entered at this label.

The total of the amounts at B, C and D must equal the amount included in the base amount otherwise, a warning message 'Your claim does not balance'will display in the Excel spreadsheet.

Deductions for pilot plant expenditure

Post-23 July 1996 pilot plant is:

• an experimental model of other plant for use in R&D activities or for use in commercial production, one that is not for use in commercial production, but that has all of the intended characteristics of the other plant it is modelled on
• plant acquired after 23 July 1996 (and before 29 January 2001), and
• plant acquired or constructed for the company to use exclusively for carrying on R&D activities (subsections 73B(1) and 73B(4C) of ITAA 1936).

You can only claim a deduction for expenditure in acquiring or constructing such an item of pilot plant if the unit of pilot plant is used exclusively for carrying on R&D activities during the year of income.

The base amount at this item is the annual deduction percentage of the qualifying pilot plant expenditure for such items, as calculated under subsection 73B(4D) or (4E) of ITAA 1936.

The annual deduction percentage is 100% (as per subsection 73B(4G) of ITAA 1936) if:

• the qualifying pilot plant expenditure is $300 or less, or
• the useful life of the qualifying pilot plant is less than three years.

Otherwise, determine the annual deduction percentage to be used in calculating the amount eligible for deduction as two-thirds of the percentage shown in the table in subsection 73B(4H) of ITAA 1936.

To determine useful life for the purposes of applying this table, Subdivision 42-C of ITAA 1997 applies (see subsection 73B(4J) of ITAA 1936).

For pilot plant acquired or constructed after 29 January 2001, see item 9.

Adjust the amount of pilot plant expenditure claimed in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936).

At A enter the annual deduction percentage of pilot plant expenditure as part of the total net amount to be entered at this label (the base amount).

At B enter the annual deduction percentage of pilot plant expenditure claimable at 100%, as part of the total net amount to be entered at this label.

At C enter the annual deduction percentage of pilot plant expenditure claimable at 125%, as part of the total net amount to be entered at this label.

The total of the amounts at B and C must equal the amounts included in the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

The sum of all post-23 July 1996 pilot plant deductions allowable to a company for such pilot plant (for all years) must not exceed the qualifying pilot plant expenditure multiplied by 1.25 (subsection 73B(15AB) of ITAA 1936).

Balancing adjustments (loss) on the disposal of plant and pilot plant

Balancing adjustments may be needed if items of plant/pilot plant whose expenditure has been deducted under subsections 73B(15) and 73B(15AA) of ITAA 1936 are disposed of, lost or destroyed after being used exclusively for carrying on R&D activities, provided no deduction is allowable to the company for depreciation under Division 42 of Income Tax Assessment Act 1997 (ITAA 1997).

Such balancing adjustments are covered under subsections 73B(23) and 73B(24B) of ITAA 1936. The consideration received for the plant at the time of disposal may vary from the written-down value (the original cost of the item less deductions for qualifying plant expenditure as calculated in accordance with subsections 73B(4A) and 73B(4B) of ITAA 1936). If this balancing adjustment is a loss, record it at this item.

If the consideration receivable for the disposal, loss or destruction of the unit of R&D plant is less than the written-down value, you can claim the amount of this difference (paragraphs 73B(23)(e) and 73B(23)(f) of ITAA 1936).

At A enter the amount of any balancing adjustment loss, as part of the total net amount to be entered at this label (the base amount).

At B enter the amount of any balancing adjustment (deduction) amounts claimable at 100%, as part of the total net amount to be entered at this label.

At C enter the amount of any balancing adjustment (deduction) amounts claimable at 125% in accordance with subparagraph 73B(23)(e)(i) of ITAA 1936, as part of the total net amount to be entered at this label.

The total of the amounts at B and C must equal the amount included in the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsections 73B(1), (1C), (4), (4A), (4B) to (4J), (5), (5AA), (5AB), (15), (15A) (15AA), (15AB), (18), (20), (21A) and (24A) and (24B) of ITAA 1936
• Subdivision 42-C and section 42-18 of ITAA 1997
• Taxation Ruling TR 2002/1
• Guide to the R&D tax concession

Item 8 Disposal profits - pre-29 January 2001

Plant balancing adjustments (profits)

If the consideration receivable is greater than the written-down value of the unit of plant (paragraph 73B(23)(f) of Income Tax Assessment Act 1936 (ITAA 1936), include at item 8 the amount by which the consideration exceeds the written-down value, up to the limit of the difference between the cost of the plant and its written-down value.

If the company chooses to take the research and development (R&D) tax offset, you will use this amount in calculating the size of the offset.

At E and F include the amount of any balancing adjustment (assessable income), as part of the total net amount entered at these labels.

Balancing adjustments sale of pilot plant (profits)

If the consideration receivable is greater than the written-down value of the unit of pilot plant (paragraph 73B(24)(f) of ITAA 1936), include the amount by which the consideration exceeds the written-down value, up to a limit of the difference between the cost of the plant and its written-down value. Include this amount in the calculation of the net base amount at item 8.

The amount at E must equal the amount at F otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsections 73B(1), 73B(4B), 73B(15AA), 73B(23), 73B(24), 73B(24B) of ITAA 1936
• Guide to the R&D tax concession

Item 9 Plant and depreciating assets - post-29 January 2001

Item 9 records deductions for depreciating assets (section 73BB of Income Tax Assessment Act 1936 (ITAA 1936), including certain capital works, used in carrying on research and development (R&D) activities. They must have begun to be constructed, or have been acquired under contracts entered into, after midday Australian Eastern Standard Time on 29 January 2001.

The amount allowable is determined through a notional application of the provisions of Division 40 of Income Tax Assessment Act 1997 (ITAA 1997), subject to certain assumptions. These are set out in section 73BC of ITAA 1936.

For an asset applied to non-R&D purposes as well as R&D use in a year, you can claim the R&D portion of the decline in value under section 73BA of ITAA 1936. The remainder of the deduction is determined under Division 40 of ITAA 1997.

If an STS taxpayer, or a taxpayer who could otherwise allocate an asset to a Division 40 low-value pool, uses that asset for R&D activities as its first use, the taxpayer must claim deductions for it under section 73BA of ITAA 1936, not the STS (Subdivision 328-D) or low-value pool provisions (Subdivision 40-E). If the asset is used for non-R&D purposes for part of the year or in a subsequent year, deductions for that part of the year or the subsequent year will be considered under Division 40 of the ITAA 1997.

If an asset was not used for R&D in an earlier income year and the company was entitled to a deduction for the asset(s) under a Division 40 low-value pool or an STS pool in that year, you should continue to calculate deductions under the relevant pooling provisions, even if the asset is subsequently used for R&D.

You may need to complete the Capital allowances schedule 2005.

For more information, see the Guide to depreciating assets 2005.

You cannot claim a deduction if the company is entitled to a deduction for the asset under the simplified tax system pooling provisions (Subdivision 328-B of ITAA 1997) or a Division 40 low-value pool (section 40-440 of ITAA 1997).

Adjust the amount of plant and depreciating assets claimed in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936).

At H enter the notional Division 40 amount as determined under sections 73BA to 73BC of ITAA 1936 (the base amount).

At I enter the notional Division 40 amount as determined under sections 73BA to 73BC of ITAA 1936 claimable at 100%, including where the aggregate R&D amount is less than $20,000.

At J enter the notional Division 40 amount as determined under sections 73BA to 73BC of ITAA 1936, claimable at 125%.

The total of the amounts at I and J must equal the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• sections 73BA, 73BB, 73BC of ITAA 1936
• Division 40 of ITAA 1997
• Division 43 of ITAA 1997
• Guide to the R&D tax concession

Item 10 Disposal losses - post-29 January 2001

Notes on balancing adjustments - item 10

You may need to make balancing adjustments under subsection 73BF of Income Tax Assessment Act 1936 (ITAA 1936) or section 40-292 of Income Tax Assessment Act 1997 (ITAA 1997) if section 73BA depreciating assets are disposed of (section 40-295 of ITAA 1997). If the termination value of the asset at the time of disposal is different from its adjustable value just before the event occurred (section 40-300 of ITAA 1997), you will need to make a balancing adjustment. Record the amount of this balancing adjustment at item 10 for a loss or at item 11 for a profit.

If the section 73BA depreciating asset has never attracted deductions under Divisions 42 or 40 of ITAA 1997, calculate the balancing adjustment under section 73BF. For section 73BA depreciating assets that have attracted such deductions, calculate the balancing adjustment under section 40-292 of ITAA 1997.

Before starting item 10 see the Guide to depreciating assets and the Guide to the R&D tax concession.

If the company is entitled to deduct an amount under section 40-292 of ITAA 1997 following a balancing adjustment event (such as disposal), include the amount of any part of the balancing adjustment that the company is entitled to increase by 25% under the formula in subsection 40-292(4) of ITAA 1997, in the calculation of the base amount for item 10.

If the company is entitled to deduct an amount under section 73BF of ITAA 1936 following a balancing adjustment event, include at item 10 the amount of any part of the balancing adjustment that the company is entitled to increase by 25% under the formula in subsection 73BF(3) of ITAA 1936.

At K enter the amount of any balancing adjustment (deduction) (the base amount).

At N enter the amount of any balancing adjustment (deduction) amounts claimable at 100%.

At O enter the amount of any balancing adjustment (deduction) amounts claimable at 125%, in accordance with subsection 73BF(3) of ITAA 1936.

The total of the amounts at N and O must equal the amounts included in the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• section 40-292 of ITAA 1997
• section 73BF of ITAA 1936
• Guide to the R&D tax concession

Item 11 Disposal profits - post-29 January 2001

Notes on balancing adjustments - item 11

You may need to make balancing adjustments under subsection 73BF of Income Tax Assessment Act 1936 (ITAA 1936) or section 40-292 of Income Tax Assessment Act 1997 (ITAA 1997) if section 73BA depreciating assets are disposed of (section 40-295 of ITAA 1997). If the termination value of the asset at the time of disposal is different from its adjustable value just before the event occurred (section 40-300 of ITAA 1997), you will need to make a balancing adjustment. Record the amount of this balancing adjustment at item 10 for a loss or at item 11 for a profit.

If the section 73BA depreciating asset has never attracted deductions under Divisions 42 or 40 of ITAA 1997, calculate the balancing adjustment under section 73BF. For section 73BA depreciating assets that have attracted such deductions, calculate the balancing adjustment under section 40-292 of ITAA 1997.

Before starting item 11, see the Guide to depreciating assets and the Guide to the R&D tax concession.

If the company is required to include in assessable income an amount under section 40-292 of Income Tax Assessment Act 1997 (ITAA 1997) following a balancing adjustment event (such as disposal), include at item 11 the amount of any part of the balancing adjustment that the company is required to increase by 25% under the formula in subsection 40-292(4) of ITAA 1997.

If the company is required to include in assessable income an amount under section 73BF of Income Tax Assessment Act 1936 (ITAA 1936) following a balancing adjustment event, include at item 11 the amount of any part of the balancing adjustment that the company is required to increase by 25% under the formula in subsection 73BF(3) of ITAA 1936.

At P enter the amount of any balancing adjustment (assessable amount) (the base amount).

At Q enter the amount of any balancing adjustment (assessable amount) amounts claimable at 100%.

At R enter the amount of any balancing adjustment (assessable income) amounts claimable at 125% in accordance with subsection 73BF(3) of ITAA 1936.

The total of the amounts at Q and R must equal the amount included in the base amount otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• section 40-292 of ITAA 1997
• section 73BF of ITAA 1936
• Guide to the R&D tax concession
• Guide to depreciating assets

Item 12 Core technology - deductible amount

At item 12 include deductions for core technology expenditure as defined in subsection 73B(1) and (1AB) of Income Tax Assessment Act 1936 (ITAA 1936). Core technology expenditure includes expenditure incurred in acquiring, or in acquiring the right to use, core technology for research and development (R&D) activities that are carried on by the company or on its behalf.

Subsection 73B(12A) of ITAA 1936 limits how much core technology expenditure incurred in a year of income can be deducted. A maximum of one-third of R&D expenditure incurred during the year on R&D activities related to the core technology can be deducted.

Under subsections 73B(12A) and 73B(12B) of ITAA 1936, any undeducted core technology expenditure amounts can be carried forward to future years when the company undertakes R&D activities related to the core technology.

Adjust the amount of core technology expenditure claimed in accordance with prepayment provisions (section 82KZL to 82KZMF of ITAA 1936).

You may need to make an adjustment if core technology is disposed of (subsections 73B(12A) and 73B(12B) of ITAA 1936).

If core technology expenditure is deductible under subsection 73B(12A) and, as a result of the company joining a consolidated group, the tax cost of the core technology asset is 'set' (see section 701-10 and 701-55 of ITAA 1997), you may need to make an adjustment to any deductions allowable for the decline in value of that asset under Division 40 (ITAA 1997). (See section 73BAF of ITAA 1936.)

At S and T enter the total amount of deductible core technology expenditure for the year (after the operation of subsection 73B(12A) of ITAA 1936).

The amount at S must equal the amount at T otherwise a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsection 73B(1AB), 73B(1), 73B(12), 73B(12A) and 73B(12B)of ITAA 1936
• subsections 73B(27A), 73B(27B) and 73B(27C) of ITAA 1936
• Taxation Determination TD 98/1
• Guide to the R&D tax concession

Item 13 Interest or amounts in the nature of interest

At item 13 enter interest expenditure as defined in subsection 73B(1) of Income Tax Assessment Act 1936 (ITAA 1936) and allowable as a deduction under subsection 73B(14A) of ITAA 1936. This item includes interest, or an amount in the nature of interest, incurred during the year of income in the financing of R&D activities.

You may need to adjust the amount of interest expenditure claimed in accordance with the prepayment provisions (sections 82KZL to 82KZMF of ITAA 1936).

At U and V enter the amount of interest expenditure as defined in subsection 73B(1) of ITAA 1936.

The amount at U must equal the amount at V otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

More information

For more information, see:

• subsection 73B(1) and 73B(14A) of ITAA 1936
• Guide to the R&D tax concession

Item 14 Residual feedstock expenditure

Feedstock expenditure items

To find out how much to include at the feedstock expenditure items 6 and 14, first determine the following amounts.

• Feedstock expenditure - expenditure incurred in acquiring or producing materials or goods processed or transformed by the company in R&D activities. It includes expenditure on energy directly input into processing or transforming these materials or goods.
  
• Feedstock input - feedstock expenditure for materials or goods that were processed or transformed in research and development (R&D) activities during the year of income.
  
• Feedstock output - the sales proceeds or value of any products obtained during the year of income from processing or transforming the materials or goods that were feedstock expenditure. It is either the amount received or receivable for the products sold in arm's length transactions or, if not sold, or not sold in an arm's length transaction, the amount that would have been received if they had been sold in an arm's length transaction.

Residual feedstock expenditure is the lesser amount of the company's feedstock input and feedstock output for R&D activities in the year of income.

If feedstock inputs are:

• greater than feedstock outputs, record the outputs amount at W Residual feedstock expenditure.
• less than feedstock outputs, record the inputs amount at W Residual feedstock expenditure.

This is the residual feedstock expenditure, as defined in subsection 73B(1) of Income Tax Assessment Act 1936 (ITAA 1936).

The residual feedstock expenditure will not be deductible at the concessional rate. It is claimable at 100%. Subsection 73B(14B) of ITAA 1936 allows a deduction for residual feedstock expenditure.

At W and X enter the amount of residual feedstock expenditure.

The amount at W must equal the amount at X otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.

Item 15 Total of allocated base amounts

The Excel spreadsheet version of the Research and development tax concession schedule 2005 will automatically total each column.

Item 16 Claims including concession

The Excel spreadsheet version of the Research and development tax concession schedule 2005 will automatically total each column by multiplying the labels at item 15 by the appropriate concessional percentage.

Item 17 Total claim

The amount at L item 17 is the total of the amounts at E, F and G item 16 - the Excel spreadsheet version of the Research and development tax concession schedule 2005 automatically calculates the value for L.

Transfer this amount to L R&D tax concession - not including label M at item 7 Reconciliation to taxable income or loss on page 2 of the Company tax return 2005.

If this amount is negative, transfer the amount and code L to L R&D tax concession - not including label M at item 7 Reconciliation to taxable income or loss on page 2 of the Company tax return 2005.

More information

For more information, see the instructions for L R&D tax concession - not including label M in the Company tax return 2005 instructions.

PART B Expenditure on items 1-6

Item 1 Cooperative research centre contributions

At I item 1 enter the total of any research and development (R&D) contributions to cooperative research centres (CRCs) that were included as base amounts in Part A Calculation of research and development deduction.

Item 2 Trading stock expenditure

At J item 2 enter the total of any trading stock expenditures that were included as base amounts in items 1 to 5 of Part A Calculation of research and development deduction. Trading stock expenditures are expenditures incurred in connection with acquiring trading stock.

Item 3 Royalties paid to non-residents for the use of core technology

At K item 3 enter the total of any royalties paid for core technology used in R&D activities.

Item 4 Total expenditure on plant and depreciating assets

At N item 4 enter the total of any expenditure incurred in this income year on purchasing any items of plant or depreciating assets used in R&D activities.

Item 5 Total expenditure on core technology

At O item 5 enter the total of any expenditure on core technology that was used in R&D activities.

Item 6 Building expenditure and other adjustments required to calculate the company's aggregate R&D amount

At X item 6 enter any amounts not included in Part A that are needed to calculate the company's aggregate R&D amount. These amounts form part of the aggregate research and development amount even though they are not deductible under 73B of the Income Tax Assessment Act 1936 (ITAA 1936).

These include:

• the total amount of any capital expenditure on buildings used for the purpose of carrying on R&D activities, deductible under Division 43 of Income Tax Assessment Act 1997 (ITAA 1997), and
• for companies that are lodging a return regarding income and deductions for a period before or after they joined a consolidated group - the additional aggregate research and development amount calculated in accordance with section 716-850 of ITAA 1997

PART C Government grants and recoupments

At P enter the total amount of government grants, recoupments and benefits received or entitled to be received for research and development (R&D) activities for which the company is also claiming the R&D tax concession in the 2004-05 income year. Exclude amounts received under cooperative research centre (CRC) programs.

The clawback provisions (section 73C or 73CB of Income Tax Assessment Act 1936 (ITAA 1936)) may operate on these amounts.

For instructions on the application of the clawback provisions, see the Guide to the R&D tax concession

Expenditure to which clawback applies is entered in the 'Claimable at 100%' column in Part A of the schedule. Include any income from grants in the Company tax return 2005 at item 6 label Q 'Assessable government Industry payments'

PART D R&D incremental tax concession

Calculation instructions

The Excel spreadsheet version of the Research and development tax concession schedule 2005 (the schedule) asks the question: 'Do you wish to test the company's entitlement to the incremental concession under Section 73Q of the ITAA 1936 (Yes or No?)'.

If your answer is 'No', you can go to Part E.

Otherwise, the following instructions will assist you in completing Part D and determining your entitlement (if eligible). You must complete this part for all companies in the group that carry out research and development (R&D).

The steps below show how to calculate the amount of the premium (additional 50%) a company may be eligible to claim. Definitions of the terms used throughout these instructions are available.

Year abbreviations

Y0	the current year of income for which the company tax return is being completed - for most companies the current year is 2004-05
Y-1	the 2003-04 year of income (if 2004-05 is the current year of income)
Y-2	the 2002-03 year of income (if 2004-05 is the current year of income)
Y-3	the 2001-02 year of income (if 2004-05 is the current year of income)

Step 1 - Is the company a member of a group for the purposes of the incremental tax concession?

Test whether the company has any group relationships and determine any relevant group membership periods by using the grouping rules in sections 73L and 73R of Income Tax Assessment Act 1936 (ITAA 1936) for the year of income and the previous three years of income. A head company of a consolidated group will also need to consider the R&D grouping provisions (for example, if it is grouped with other entities with less than 100% control or ownership).

If the company is a member of such a group, follow steps 2-3 for all members of the group that have had incremental expenditure in a group membership period in any of the four years Y⁰, Y^-1, Y^-2 and Y^-3.

Enter the name and tax file number (TFN) of the company and all group members (if any) that have incurred incremental expenditure in a group membership period in any of the four years at item 1 in Part D Research and development incremental tax concession on page 2 of the R&D schedule.

If there is not enough space for all group members then use the second Excel worksheet entitled 'Additional Schedule Part D'.

Step 2 - Calculate R&D spend for each year - that is, the total incremental expenditure for the company and grouped company members.

Incremental expenditure is R&D expenditure as defined in subsections 73B(1) of ITAA 1936, and therefore includes contracted expenditure, salary expenditure and other expenditure incurred directly in respect of R&D activities, whether deductible or not.

Exclude the following:

• expenditure to lease or hire plant, and
• any expenditure included above under a contract that is, in substance, for the acquisition of plant and not for the receipt of services.

The following labels in Part A relate to the expenditure items that may form part of incremental expenditure of the company in question:

• A item 1
• E item 2
• H item 3
• N item 4
• V item 6

The schedule will automatically populate the company's name, TFN and Y⁰ incremental spend at row 'a' item 1 Part D.

Although Y⁰ is automatically populated from the information contained in Part A of the R&D schedule, it only includes deductible amounts. The amount populated at Y⁰ will be incorrect if any of the following circumstances apply

• The company has incurred some R&D expenditure which is not deductible (for example, in relation to unregistered activities). You must include such amounts at row (f) of Part D.
• An intra-group mark-up is included in Part A. You must deduct the amount of the intra-group mark-up at row (f) (subsection 73P(5) and 73B(14AA) to (14AD) of ITAA 1936). (Note: If no other amounts are included at row (f) insert your value as a negative).
• If section 73BAC or section 73BAD of the ITAA 1936 apply to the company (a company has left or joined a consolidated group) you may need to make an adjustment (positive or negative) to row (f). For more information, refer to section 73BAC and section 73BAD of the ITAA 1936 and the Guide to the R&D tax concession.
• If expenditure under a contract is both for the acquisition of plant and for the provision of services, you must apportion the expenditure on a reasonable basis between them, as per subsection 73P(3) of ITAA 1936. If none of the expenditure is apportionable, do not include the expenditure as incremental expenditure (subsection 73P(4) of ITAA 1936).

The company will need to calculate its amount of incremental expenditure for the immediate prior three years of income (Y^-1,Y^-2, and Y^-3) and the incremental expenditure for all other entities with group membership periods for Y⁰_, Y^-1, Y^-2, and Y^-3.

Enter the amounts of incremental expenditures for each company in the columns labeled Y⁰, Y^-1, Y^-2, and Y^-3 incremental expenditure at item 1 in Part D Research and development incremental tax concession.

Ensure that incremental expenditure for a consolidated group as claimant is recorded in a single row at Part D only (i.e. not disaggregated).

Step 3 - Calculation of adjustment amounts and adjustment balances

The schedule will automatically populate the total R&D spend of the company, for Y⁰, Y^-1, Y^-2 and Y^-3, the adjustment amounts and the adjustment balances.

If the company was eligible for the incremental tax concession in Y^-1 and/or Y^-2, AND satisfies the provisions of section 73T(3), 73T(4) and or 73V(3) of ITAA 1936, select 'Yes' for the relevant year, in answering the question 'Please indicate whether the company, or any of its group members, was eligible to claim the increment in 2004 and/ or 2003'.

The schedule will then automatically calculate any adjustment amount for Y⁰ (AA⁰) and Y^-1 (AA^-1), and the adjustment balance (AB).

The schedule will then automatically calculate (at label M) the deduction which the company is entitled to under the incremental tax concession. Transfer this amount to Label M - Incremental R&D (additional 50%) deduction Item 7 - reconciliation to taxable income or loss on page 2 of the Company tax return 2005. 

More information

For more information, see:

• sections 73L to 73Z of ITAA 1936
• section 73B of ITAA 1936
•  Guide to the R&D tax concession

PART E R&D tax offset

Calculation instructions

If the company chooses to take the research and development (R&D) tax offset, it means that the company has chosen to forgo an R&D tax concession deduction (see subsection 73I(1) of Income Tax Assessment Act 1936 (ITAA 1936)). The company cannot claim both.

	The company can only choose to take the R&D tax offset on its return of income (which includes the R&D schedule).
	The company must be registered with the Industry Research and Development Board (IRDB) before it makes its choice.

The company cannot choose to take the R&D tax offset if an exempt entity, the affiliates of an exempt entity, an exempt entity together with its affiliates, or two or more exempt entities, at any time during the R&D tax offset year, legally or beneficially own, or have the right to acquire, the legal or beneficial ownership of interests in the company that carry between them the right to:

• exercise, or control the exercise of, at least 25% of the voting power of the company, or
• receive at least 25% of any distribution of income or capital by the company (refer subsection 73J(2) of ITAA 1936).

What to do if your answer is 'No'

If you choose 'No', you have completed the R&D schedule.

What to do if your answer is 'Yes'

If you choose 'Yes', the remaining instructions will assist you in determining the company's eligibility as well as any entitlement to the R&D tax offset.

1. The schedule will automatically populate the company's name, tax file number (TFN) and aggregate R&D amount at row (a).
2. You must insert the company's turnover (calculated in accordance with section 73K of the ITAA 1936) at row (a).
3. Enter the company name, tax file number of all entities that are required to be grouped under section 73L of ITAA 1936, at item 1 Research and development tax offset in Part E.
4. Enter the amount of each entity's aggregate R&D expenditure, as defined in subsection 73B(1), and the turnover against the entity's tax file number in the columns Aggregate R&D amount and 'Entity turnover' respectively.

5. Attach an additional schedule if there is insufficient space for all group members.
6. Ensure that the aggregateR&D amounts and turnover from the additional schedule are summed and the totals placed in row (f) of the original schedule. If the total of the 'Aggregate R&D amount' column is $1,000,000 or less and the total of the 'R&D Group Turnover' column is less than $5,000,000, the company is eligible to choose to claim the R&D tax offset (paragraphs 73K(1)(c) and (d) of ITAA 1936).

7. The amount at Label Y is the company's entitlement to the R&D tax offset. Transfer this amount to Label Y R&D tax offset, if chosen at Item 7, Reconciliation to taxable income or loss on page 2 of the Company tax return 2005. Transfer the amount calculated at Label U (30% (company tax rate) of Label Y) to Label U - R&D tax offset in the Calculation Statement on page 4 of the Company tax return 2005.
8. If the company is eligible to make this choice, but does not wish to do so, change your answer to the question 'Do you wish to check eligibility for the R&D tax offset  to 'No'. Ensure that Label Y R&D tax offset, at Item 7, Reconciliation to taxable incomeor loss on page 2 of the Company tax return 2005 and Label U - R&D tax offset in the Calculation Statement on page 4 of the Company tax return 2005 are not completed.

More information

For more information, see:

• sections 73H to 73M and 73Bof ITAA 1936
• Guide to the R&D tax concession

How to lodge the R&D schedule

You should lodge your Research and development tax concession schedule 2005 (the R&D schedule) with the appropriate company tax return. We will accept either a printout of your completed Excel spreadsheet version of the R&D schedule or a completed Research and development tax concession schedule 2005 form.

Requests for amendments

If your company wishes to request an amendment that includes changes to its research and development (R&D) claim, you must complete a research and development (R&D) schedule showing the amended figures. Send this schedule, with a letter requesting the amendment, to:

Australian Taxation Office
GPO Box 9990
Sydney NSW 2001

Abbreviations

ABN	Australian business number
CRC	cooperative research centre
IRADA 1986	Industry Research and Development Act 1986
IRDB	Industry Research and Development Board
ITAA 1936	Income Tax Assessment Act 1936
ITAA 1997	Income Tax Assessment Act 1997
R&D	research and development
RRA	registered research agency
STS	simplified tax system
TFN	tax file number

Definitions

Adjustment amount year zero (AA⁰)

AA⁰ is the abbreviation used to denote a group's adjustment amount for the Y⁰ year of income (subsection 73P(2) of Income Tax Assessment Act 1936 (ITAA 1936)).

Adjustment amount year minus one (AA^-1)

AA^-1 is the abbreviation used to denote a group's adjustment amount for the Y^-1 year of income (subsection 73P(2) of ITAA 1936).

Aggregate R&D amounts

Subsection 73B(1) defines the expenditures and deductions that comprise aggregate research and development (R&D) amount.

To claim the additional 25% concession this amount (or a grossed-up amount where a subsidiary company has joined or left a consolidated group and has a non-membership period of less than 365 days) needs to be more than $20,000. However, payments to an registered research agency (RRA) are not subject to this threshold.

To be eligible to claim the R&D tax offset the aggregate R&D amount must be $1,000,000 or less.

Balancing adjustment event

A balancing adjustment event occurs when an asset is disposed of, lost or destroyed after being used exclusively for carrying on R&D activities.

Current year (Y⁰)

For the 2004-05 current year of income, Y⁰ is the abbreviation used to denote that year of income.

Incremental expenditure

Incremental expenditure means expenditure that is R&D expenditure except:

• expenditure to lease or hire plant, and
• expenditure under a contract to the extent that it is, in substance, for the acquisition of plant and not for the provision of services (subsection 73P(2) of ITAA 1936).

Previous year (Y^-1)

For the 2004-05 current year of income, Y^-1 is the abbreviation used to denote the 2003-04 year of income.

R&D spend

R&D spend of an eligible company for a year of income means the sum of:

• the incremental expenditure of the eligible company for the year of income incurred during its group membership period, and
• the incremental expenditure of each group member of the eligible company for the year of income incurred during its group membership period (subsection 73P(2) of ITAA 1936).

Running average (RA⁰)

RA⁰ is the abbreviation used to denote the group's running average for the Y⁰ income year (subsections 73P(2) and 73U(1) of ITAA 1936).

Running average (RA-¹)

RA^-1 is the abbreviation used to denote the group's running average for the Y^-1 income (subsections 73P(2) and 73U(2) of ITAA 1936).

Total group mark-up

The total group mark-up is the sum of the amounts derived by persons during the year of income for goods and services in respect of all or part of the things for which the R&D amount was for while those persons were grouped with the eligible company mentioned in section 73L less the actual cost to those persons of providing those goods or services (subsection 73B(14AC) of ITAA 1936).

Year Y-2 (Y^-2)

For the 2004-05 current year of income, Y^-2 is the abbreviation used for the 2002-03 year of income.

Year Y-3 (Y^-3)

For the 2004-05 current year of income, Y^-3 is the abbreviation used for the 2001-02 year of income.

What to read/do next

Other publications you may need to refer to when completing the R&D schedule are:

• Company tax return 2005 instructions (NAT 0669-6.2005)
• Guide to depreciating assets (NAT 1996-6.2005)
• Income Tax Assessment Act 1936
• Income Tax Assessment Act 1997
• Industry Research and Development Act 1986

Taxation Ruling:

• IT 2442 - Income tax: concession for eligible research and development expenditure
• IT 2451a - Income tax: investor funding of research and development activities
• IT 2552 - Income tax: research and development (R&D) - costing of expenditure
• IT 2552A (Addendum) - Income tax: research and development (R&D) - costing of expenditure
• TR 2002/1 - Income tax: research and development: plant expenditure (pre 29 January 2001)

Taxation Determination:

• TD 98/1 - Income tax: does 'expenditure on research and development activities' in subsection 73B(27A) and sections 73C and 73D of the Income Tax Assessment Act 1936 include 'core technology expenditure'?