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Item 12

Last updated 11 August 2020

Core technology - deductible amount

(relevant to Australian owned R&D only)

At item 12 include deductions for core technology expenditure as defined in subsections 73B(1) and 73B(1AB) of the ITAA 1936. Core technology expenditure is expenditure incurred in acquiring, or in acquiring the right to use, core technology for Australian owned R&D that is carried on by the company or on its behalf.

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

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

Note: You may need to make an adjustment if core technology is disposed of (subsections 73B(12A) and 73B(12B) of the 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 sections 701-10 and 701-55 of the 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 the ITAA 1936.)

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

The amount at S must equal the amount at T.

For more information, see:

  • subsections 73B(1), 73B(1AB), 73B(12), 73B(12A), 73B(12B), 73B(27A), 73B(27B) and 73B(27C) of the ITAA 1936
  • 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'?
  • Research and development tax concession.