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Item 1

Last updated 11 August 2020

Contracted expenditure - RRA

(relevant to Australian owned and foreign owned R&D)

Show at this item expenditure incurred by an eligible company to an RRA for the performance by the RRA of research and development activities on behalf of the company or wholly or primarily on behalf of a grouped foreign company. The Definitions list defines 'registered Australian research agency (RRA)'.

The RRA must not be an associate of the eligible company and must have been registered with Innovation Australia in respect of the class of activities on which the expenditure was incurred.

Expenditure incurred on Australian owned R&D cannot be 'contracted expenditure' unless, when 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 the ITAA 1936). This restriction does not apply to expenditure incurred on foreign owned R&D.

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

At A show the total amount of eligible contracted expenditure (the base amount).

At B show any amount of contracted expenditure on Australian owned R&D claimable at 100%.

At C show any amount of contracted expenditure on Australian owned R&D claimable at 125%.

At D show any amount of contracted expenditure on foreign owned R&D.

The total of the amounts at B, C and D must equal the base amount at A.

For more information, see:

Item 2

Salary expenditure

(relevant to Australian owned and foreign owned R&D)

At item 2 show the amount of eligible salary expenditure for employees who are actually carrying out eligible research and development activities (as defined in subsection 73B(1) of the 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.

You may need to apportion the expenditure incurred between research and development and non-research and development activities.

You cannot claim this type of expenditure in respect of Australian owned R&D unless your aggregate research and development amount is greater than $20,000.

You cannot claim this type of expenditure in respect of foreign owned R&D unless your expenditure on foreign owned R&D is greater than $20,000.

This item does not include:

  • salary expenditure incurred in the construction of R&D plant, depreciating assets, structural improvements and buildings
  • salary expenditure of R&D support staff not directly connected with the research and development activities - include those at item 3 Other R&D expenditure
  • salary expenditure in respect of Australian owned R&D where your aggregate research and development amount is less than or equal to $20,000
  • salary expenditure in respect of foreign owned R&D where your expenditure on foreign owned R&D is less than or equal to $20,000.

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

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

At F show any amount of R&D salary expenditure on Australian owned R&D claimable at 100%.

At G show any amount of R&D salary expenditure on Australian owned R&D claimable at 125%.

At A show any amount of salary expenditure on foreign owned R&D.

The total of the amounts at F, G and A must equal the base amount at E.

For more information, see:

Item 3

Other R&D expenditure

(relevant to Australian owned and foreign owned R&D)

At item 3 show eligible other R&D expenditure incurred directly in respect of relevant research and development activities carried on, by or on behalf of the company, or wholly or primarily on behalf of a grouped foreign company. (See paragraph (c) of the definition of 'research and development expenditure', subsection 73B(1) of the ITAA 1936.)

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

Overhead and administrative expenditure is directly in respect of research and development activities where:

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

You cannot claim this type of expenditure in respect of Australian owned R&D unless your aggregate research and development amount is greater than $20,000.

You cannot claim this type of expenditure in respect of foreign owned R&D unless your expenditure on foreign owned R&D is greater than $20,000.

Adjust the amount of other research and development expenditure claimed in accordance with the prepayment provisions (sections 82KZL to 82KZMF of the ITAA 1936).

'Other R&D expenditure' does not include:

  • core technology expenditure
  • interest expenditure
  • feedstock expenditure (show eligible feedstock expenditure and residual feedstock expenditure (Australian owned R&D only) at separate items)
  • expenditure incurred acquiring or constructing tangible assets, plant, pilot plant (including certain prototypes) or a building, or extending, altering or making improvements to a building
  • expenditure incurred acquiring or constructing a section 73BA depreciating asset
  • other expenditure in respect of Australian owned R&D where your aggregate research and development amount is less than or equal to $20,000
  • other expenditure in respect of foreign owned R&D where your expenditure on foreign owned R&D is less than or equal to $20,000.

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

At I show any amount of other research and development expenditure on Australian owned R&D claimable at 100%.

At J show any amount of other research and development expenditure on Australian owned R&D claimable at 125%.

At K show any amount of other research and development expenditure on foreign owned R&D.

The total of the amounts at I, J and K must equal the base amount at H.

For more information, see:

QC21746