• Item 4

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Contract - other

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

    Item 4 is a component of paragraph (c) of the definition of research and development expenditure in subsection 73B(1) of the ITAA 1936 'Other R&D expenditure'. It covers any eligible expenditure incurred under a contract to another party (other than an RRA) that is 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.

    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 excludes:

    • contracted expenditure carried out by an RRA (show this at item 1)
    • expenditure under a contract that is, in substance, for the acquisition of plant and not for the receipt of services
    • expenditure in respect of Australian owned R&D where your aggregate R&D amount is less than or equal to $20,000
    • 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 'contract - other' expenditure you claim in accordance with the prepayment provisions (sections 82KZL to 82KZMF of the ITAA 1936). Subsection 73B(9) of the ITAA 1936 does not allow a deduction for expenditure incurred on research and development activities on behalf of any other person unless the expenditure is incurred wholly or primarily on behalf of a grouped foreign company.

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

    At O show any amount of contract - other expenditure on Australian owned R&D claimable at 100%.

    At P show any amount of contract - other expenditure on Australian owned R&D claimable at 125%.

    At Q show any amount of contract - other expenditure on foreign owned R&D.

    The total of the amounts at O, P and Q must equal the base amount at N.

    For more information, see:

    • subsections 73B(1), 73B(14), 73B(14C) and 73B(14D) of the ITAA 1936
    • Guide to the R&D tax concession.
    Last modified: 02 Jun 2010QC 22870