• Parts D & E: Australian owned & foreign owned R&D incremental tax concession

    Calculation instructions

    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

    Round all calculations to the nearest whole dollar.

    The tables referred to in the steps below begin on Table 1: Australian owned R&D incremental tax concession calculation - s73RA and 73RC steps of these instructions.

    Attention

    Before starting this section, determine whether the company is eligible under subsection 73QA(1) of the ITAA 1936 to claim the Australian owned incremental tax concession and/or under 73QB(1) of the ITAA 1936 to claim the foreign owned incremental tax concession, as relevant.

    You may use parts D and E of these instructions to help you in determining your eligibility. If so, it may be easier to defer answering the relevant eligibility questions until after the rest of part D and/or part E, as the case may be, has or have been completed.

    End of attention

    The steps below show how to calculate the amount of the extra deductions (extra 50% deduction on Australian owned R&D and/or extra 75% deduction on foreign owned R&D) that a company may be eligible to claim. See Definitions for the terms used in these instructions. If you do not wish to claim either of these deductions, do not complete these steps and go to Part F - R&D tax offset (eligible Australian owned expenditure only) of these instructions.

    Year abbreviations

    Y0

    the current year of income for which the company tax return is being completed (for most companies the current year is 2010-11)

    Y-1

    the 2009-10 year of income (if 2010-11 is the current year of income)

    Y-2

    the 2008-09 year of income (if 2010-11 is the current year of income)

    Y-3

    the 2007-08 year of income (if 2010-11 is the current year of income)

    Step 1

    Is the company a member of a group for the purposes of the R&D 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 the ITAA 1936 for the current year of income and the previous three years of income ('the four years'). The 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).

    Step 1.1

    If you incurred incremental expenditure, as defined in subsection 73P(2) of the ITAA 1936, on Australian owned R&D and are eligible for and wish to claim the Australian owned R&D incremental tax concession, you will need to complete part D of the Research and development tax concession schedule 2011.

    Write the name and TFN of the company (at a item 1) and all group members that have incurred incremental expenditure on Australian owned R&D in a group membership period in any of the four years at item 1 in part D of the Research and development tax concession schedule 2011 Also write the names of each of these companies in the first column of table 1 of these instructions.

    In addition, write the name and TFN of the company and all group members that have incurred expenditure on foreign owned R&D, as defined in subsection 73B(14C) of the ITAA 1936, in a group membership period in any of the four years at item 1 in part E of the Research and development tax concession schedule 2011 Also write the names of each of these companies in the first column of table 4 of these instructions.

    Step 1.2

    If you incurred expenditure on foreign owned R&D and are eligible for and wish to claim the foreign owned R&D incremental tax concession, you will need to complete part E of the Research and development tax concession schedule 2011.

    Write the name and TFN of the company (at a item 1) and all group members that have incurred expenditure on foreign owned R&D, as defined in subsection 73B(14C) of the ITAA 1936, in the group membership period in any of the four years at item 1 in part E of the Research and development tax concession schedule 2011 if not already completed. Also write the names of each of these companies in the first column of table 4 of these instructions, if not already completed.

    In addition, write the name and TFN of the company and all group members that have incurred incremental expenditure on Australian owned R&D in a group membership period in any of the four years at item 1 in part D of the Research and development tax concession schedule 2011, if not already completed. Also write the names of each of these companies in the first column of table 1 of these instructions, if not already completed.

    Attention

    Ensure that you write only the name of the head company (and not the subsidiary companies) for a consolidated group.

    Attach additional tables if there are not enough rows for all group members in parts D or E of the Research and development tax concession schedule 2011

    End of attention

    Step 2

    To determine the company's entitlement to the Australian owned R&D incremental tax concession (section 73QA of the ITAA 1936) and/or for input into the calculation of the company's entitlement to the foreign owned R&D incremental tax concession, complete table 1 following the steps below.

    Table 1 allows you to calculate the company's increase in expenditure on Australian owned R&D and the total increase in expenditure on Australian owned R&D by the eligible companies in the group. Table 1 follows the method statement set out in section 73RA of the ITAA 1936.

    Attention

    If your company is ineligible for the Australian owned R&D incremental tax concession but eligible for the foreign owned R&D incremental tax concession, you must still complete steps 2, 3, 4 and 6 in order to calculate the company's entitlement to the foreign owned R&D incremental tax concession. You do not need to complete step 5.

    End of attention

    Step 2.1

    Reduced expenditure on Australian owned R&D is the incremental expenditure for the company incurred in its group membership period, adjusted to take into account any government grants or recoupments attributable to that incremental expenditure.

    Calculate the reduced expenditure on Australian owned R&D for the company in its group membership period for the current year of income (Y0) and the three immediately prior years of income (Y-1, Y-2 and Y-3), using tables 2.1 to 2.4 and steps 2.1 to 2.2 for each of these years.

    Step 2.1.1

    (A in tables 2.1 to 2.4)

    Work out the company's incremental expenditure incurred in its group membership period for each relevant year (Y0, Y-1, Y-2 and Y-3).

    Incremental expenditure (defined in subsection 73P(2) of the ITAA 1936) is a subset of research and development expenditure (defined in subsection 73B(1) of the ITAA 1936) and includes contracted expenditure, salary expenditure and other expenditure incurred directly in respect of research and development activities. For these purposes, incremental expenditure only includes amounts of expenditure deductible under subsections 73B(13) and 73B(14) of the ITAA 1936 (or would be so deductible ignoring the requirement in paragraph 73B(14)(b) for a company's aggregate research and development amount to be greater than $20,000).

    It excludes the following:

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

    The following labels in part A of the Research and development tax concession schedule 2011 relate to the expenditure items that may form part of incremental expenditure in the Y0 year of income:

    • B and C in item 1
    • F and G in item 2
    • I and J in item 3
    • O and P in item 4
    • W and X in item 6.

    Write the total of the amounts shown at the labels listed above for the relevant year of income at:

    • A in table 2.1 for the Y0 year of income
    • A in table 2.2 for the Y-1 year of income
    • A in table 2.3 for the Y-2 year of income
    • A in table 2.4 for the Y-3 year of income.

    To calculate this amount for the Y-1, Y-2 and Y-3 years of income, refer to your research and development tax concession schedules for those years.

    Step 2.1.2

    (B in tables 2.1 to 2.4)

    When using figures from part A of the Research and development tax concession schedule 2011, you may need to make adjustments if any of the circumstances listed below apply to the company. The cumulative totals of these adjustments are to be written both at B in tables 2.1 to 2.4 and in rows f and g item 1 in part D of theResearch and development tax concession schedule 2011, as directed below:

    • Any total group markup is included in part A. This amount would be included as a negative in row g item 1 in part D (subsections 73B(14AC) and 73P(5) of the ITAA 1936) and at B in tables 2.1 to 2.4 as directed below.
    • Where the company has a transitional substituted accounting period in the claim year, make adjustments (positive or negative) in rows f and g to reflect the incremental expenditure incurred in the 12-month period, and at B in tables 2.1 to 2.4 as directed below.
    • If section 73BAC or 73BAD of the ITAA 1936 applies to the company (a company has left or joined a consolidated group) you may need to make an adjustment (positive or negative) in rows f and g and at B in tables 2.1 to 2.4 as directed below. See sections 73BAC and 73BAD of the ITAA 1936, and 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 the ITAA 1936. If none of the expenditure is apportionable, do not include the expenditure as incremental expenditure (subsection 73P(4) of the ITAA 1936). Include any adjustments to give effect to this in rows f and g and at B in tables 2.1 to 2.4 as directed below.
    • If you are claiming the foreign owned R&D incremental tax concession (and not the Australian owned R&D incremental tax concession) but you have also incurred expenditure on Australian owned R&D and your aggregate research and development amount is $20,000 or less, you will need to include the amount of any salary expenditure, other R&D expenditure, contract - other expenditure and eligible feedstock expenditure that you have incurred in relation to Australian owned R&D in row f and at B in tables 2.1 to 2.4 as directed below.

    Row f is used to show the net effect of these adjustments to incremental expenditure claimable at 100%. Row g is used to show the net effect of these adjustments to incremental expenditure claimable at 125%. A negative value may be written in these rows if necessary.

    Write the sum of these adjustments in rows f and g item 1 in part D of the Research and development tax concession schedule 2011 and at:

    • B in table 2.1 for the Y0 year of income
    • B in table 2.2 for the Y-1 year of income
    • B in table 2.3 for the Y-2 year of income
    • B in table 2.4 for the Y-3 year of income.

    To calculate this amount for the Y-1, Y-2 and Y-3 years of income, refer to your research and development tax concession schedules for those years.

    Step 2.1.3

    (C in tables 2.1 to 2.4)

    Work out how much (if any) of the initial clawback amount is attributable to incremental expenditure incurred in the eligible company's group membership period for each relevant year (Y0, Y-1, Y-2 and Y-3). This will be twice the amount included at A item 2 in part C of the Research and development tax concession schedule 2011.

    The initial clawback amount in relation to the relevant expenditure is an amount equal to twice the amount, or twice the total of the amounts, as the case may be, that the company or the group member has received, or became entitled to receive, as a recoupment of, or as a grant in respect of, any of the relevant expenditure. For further information on the clawback provision in section 73C of the ITAA 1936, see Guide to the R&D tax concession.

    Write the initial clawback amount attributable to incremental expenditure at:

    • C in table 2.1 for the Y0 year of income
    • C in table 2.2 for the Y-1 year of income
    • C in table 2.3 for the Y-2 year of income
    • C in table 2.4 for the Y-3 year of income.

    Step 2.1.4

    (D in tables 2.1 to 2.4)

    Add the amount at A in table 2.1 to the amount at B in table 2.1. Note that the amount at B can be a negative number in some circumstances. Subtract the amount at C in table 2.1 from the sum of A and B. If the result is negative, treat the result as zero. Write the result in D in table 2.1.

    Transfer the amounts as directed at the end of table 2.1.

    Repeat for each year, substituting table 2.1 for tables 2.2, 2.3 and 2.4 respectively.

    Step 2.2

    Repeat step 2.1 for each group member listed in table 1.

    Step 2.3

    You have now worked out the reduced expenditure on Australian owned R&D for the company and each other eligible company group member, if any.

    Add up the expenditures in each column of the additional tables to table 1 (if used) and write these in row e item 1 in part D of the Research and development tax concession schedule 2011 and row e in table 1 (the respective totals of each column in each of these should be the same).

    Total each of the columns A, B, C and D for the Y0, Y-1, Y-2 and Y-3 years of income in table 1 and write the results in row f in table 1.

    Also include these totals at Q, R, S and T, GROUP TOTALS item 1 in part D of the Research and development tax concession schedule 2011.

    Further:

    • Write the group Y-1 amount at A in table 8.1.
    • Write the group Y-2 amount at A in table 8.2.
    • Write the group Y-3 amount at A in table 8.3.

     

    Attention

    If the results for your company and each eligible group member with which you are grouped are zero at labels A, B and D in tables 2.1, 2.2, 2.3 and 2.4, you do not need to finish step 2 of these instructions.

    Write 0 at:

    • A in table 8.1
    • A in table 8.2
    • A in table 8.3
    • A in table 14
    • D in table 17.

    Further, leave M item 3 in part D of the Research and development tax concession schedule 2011 blank as you are ineligible for the Australian owned R&D incremental tax concession. Also print X in the No box at the top of part D of the Research and development tax concession schedule 2011

    Go to step 3. You do not need to complete step 5.

    End of attention

    Step 2.4

    (D in table 3)

    For the company listed in table 1, use table 3 and the instructions below to add up:

    a

    the reduced expenditure on Australian owned R&D by the eligible company in its group membership period for the Y-1 year of income (A in table 3)

    b

    the reduced expenditure on Australian owned R&D by the eligible company in its group membership period for the Y-2 year of income (B in table 3), and

    c

    the reduced expenditure on Australian owned R&D by the eligible company in its group membership period for the Y-3 year of income (C in table 3).

    Write this result at D in table 3, and transfer the result as directed at the end of table 3.

    Step 2.4.1

    Repeat step 2.4 for each year for each group member that is listed in table 1.

    Step 2.5

    (E in table 3)

    For the company, divide your result from step 2.4 (D in table 3) by 3. Write the result at E in table 3 and transfer the result as directed at the end of that table.

    Step 2.5.1

    Repeat step 2.5 for each group member that is listed in table 1.

    Step 2.6

    (G in table 3)

    For the company, subtract the result of step 2.5 (E in table 3) from the result at F in table 3 for the Y0 year of income, using table 3. Write the result in G in table 3. Transfer the result as directed at the end of table 3. The result is the 'change in expenditure on Australian owned R&D by the eligible company'.

    Step 2.6.1

    Repeat step 2.6 for each group member that is listed in table 1.

    Step 2.7

    (H in table 3)

    The 'increase in expenditure on Australian owned R&D by the eligible company' is:

    a

    the change in expenditure on Australian owned R&D by the eligible company, or

    b

    zero, if the change in expenditure on Australian owned R&D by the eligible company is a negative number.

    If the result from G in table 3 is a negative number for the company, write 0 at H in table 3. If the result from G in table 3 is a positive number for the company, write that number at H in table 3. Transfer the result as directed at the end of table 3.

    Step 2.7.1

    Repeat step 2.7 for each group member that is listed in table 1.

    Step 2.8

    Add up each of columns E, F, G and H of the additional tables to table 1 (if used) and write these in row e in table 1.

    Add up each of columns E, F, G and H in table 1 above. Write the results in row f in table 1 for each column.

    Further:

    • Write the result for row f of column G in table 1 at A in table 14.
    • Write the result for row f of column G in table 1 at C in table 15.
    • Write the result for row f of column H in table 1 at B in table 15.
    • Write the result for row f of column G in table 1 at D in table 17.

    You have now worked out the total increase in expenditure on Australian owned R&D by the eligible companies in the group and the net increase in Australian owned R&D by the group.

    If the result in either row f of column G or row f of column H in table 1 is zero, leave M item 3 in part D of the Research and development tax concession schedule 2011 blank as you are ineligible for the Australian owned R&D incremental tax concession. Also print X in the No box at the top of part D of the Research and development tax concession schedule 2011

    Go to step 3.

    Step 3

    For the purposes of determining the company's entitlement to the foreign owned R&D incremental tax concession (section 73QB of the ITAA 1936), and/or for input into the calculation of the company's entitlement to the Australian owned R&D incremental tax concession, complete table 4 using the following instructions.

    Table 4 will calculate the company's 'increase in expenditure on foreign owned R&D' and the 'total increase in expenditure on foreign owned R&D by the eligible companies in the group'. Table 4 follows the method statements set out in section 73RB of the ITAA 1936.

    Attention

    If you have determined that your company is ineligible for the foreign owned R&D incremental tax concession but is eligible for the Australian owned R&D incremental tax concession, you must still complete steps 3, 4 and 5 in order to calculate the company's entitlement to the Australian owned R&D incremental tax concession. You do not need to complete step 6.

    End of attention

    Step 3.1

    Calculate the 'reduced expenditure on foreign owned R&D' for the company for its group membership period in the current year of income (Y0) using table 5 and steps 3.1 to 3.2 below.

    Step 3.1.1

    (A in table 5)

    Work out the amount of the expenditure on foreign owned R&D (see subsections 73B(14C) and 73B(14D) of the ITAA 1936) incurred by the company in its group membership period for the Y0 year of income.

    Write the amount from J item 7 in part A of the Research and development tax concession schedule 2011 at A in table 5 of these instructions.

    Step 3.1.2

    (B in table 5)

    When using figures from part A of the Research and development tax concession schedule 2011, you may need to make adjustments if any of the following circumstances apply to the company (row f referred to below is in item 1 in part E of the Research and development tax concession schedule 2011). The cumulative totals of these adjustments are to be written in B in table 5, as well as in row f item 1 in part E of the Research and development tax concession schedule 2011, as directed below.

    • Where deduction amounts reported in part A of the Research and development tax concession schedule 2011 relate to a period that is greater or less than 12 months, you must make adjustments (positive or negative) in row f to reflect the expenditure on foreign owned R&D incurred in the 12-month period, and to B in table 5.
    • If section 73BAC or 73BAD of the ITAA 1936 applies to the company (a company has left or joined a consolidated group) you may need to make an adjustment (positive or negative) in row f, and at B in table 5. See sections 73BAC and 73BAD of the ITAA 1936, and Guide to the R&D tax concession.
    • If you are claiming the Australian owned R&D incremental tax concession (and not the foreign owned incremental tax concession), but you have also incurred expenditure on foreign owned R&D of $20,000 or less, you will need to include the amount of this expenditure in row f, and at B in table 5.

    Row f is used to show the net effect of these adjustments to expenditure on foreign owned R&D.

    Show the sum of the net effect of these adjustments at B in table 5 and in row f item 1 in part E of the Research and development tax concession schedule 2011.

    Step 3.1.3

    (D in table 5)

    Work out how much (if any) of the initial clawback is attributable to expenditure on foreign owned R&D by the eligible company in the eligible company's group membership period for the Y0 year of income. This will be twice the amount included at F in part C of the Research and development tax concession schedule 2011.

    The initial clawback amount in relation to the relevant expenditure is an amount equal to twice the amount, or twice the total of the amounts, as the case may be, that the company or the grouped person has received, or become entitled to receive, as a recoupment of, or as a grant in respect of, any of the relevant expenditure. For further information on the clawback provision in section 73C of the ITAA 1936, see Guide to the R&D tax concession.

    Write the initial clawback amount attributable to foreign owned R&D at D in table 5.

    Step 3.1.4

    (C and E in table 5)

    Add the amount at A in table 5 to the amount at B in table 5. Write the result at C in table 5. Subtract the amount at D in table 5 from C in table 5. If the result is negative, treat the result as zero. Write the result at E in table 5 and follow the transfer instructions at the end of the table.

    Step 3.2

    Repeat step 3.1 for each group member that is listed in table 4.

    You have now worked out the reduced expenditure on foreign owned R&D for the company and each other eligible company group member, if any.

    Attention

    If your results at A, B, C and E in table 5 are zero for your company and each company with which you are grouped, you do not need to finish step 3 of these instructions.

    Write 0 at:

    • B in table 8.1
    • B in table 8.2
    • B in table 8.3
    • B in table 14
    • D in table 15.

    Further, leave K item 2 in part E of the Research and development tax concession schedule 2011 blank as you are ineligible for the foreign owned R&D incremental tax concession. Also print X in the No box at the top of part E of the Research and development tax concession schedule 2011.

    Go to step 4. You do not need to complete step 6.

    End of attention

    Step 3.3

    Work out, for each of the Y-1, Y-2 and Y-3 years of income, the reduced notional expenditure on foreign owned R&D by the company in its group membership period for the year of income, using either step 3.3.1 or step 3.3.2 below for each of these years.

    If the company has incurred an amount of expenditure on foreign owned R&D in its group membership period for the Y0 year (worked out at step 3.1.1) and each of the Y-1, Y-2 and Y-3 years of income is a nil expenditureyear (concerning the establishment of a new presence in Australia, see subsection 73QB(2) of the ITAA 1936), use step 3.3.1 to calculate the notional expenditure on foreign owned R&D and do not complete step 3.3.2.

    If the company has incurred an amount of expenditure on foreign owned R&D in its group membership period for the Y0 year (worked out at step 3.1.1) and any of the Y-1, Y-2 and Y-3  years of income is not a nil expenditureyear (concerning the establishment of a new presence in Australia, see subsection 73QB(2) of the ITAA 1936), use step 3.3.2 to calculate the notional expenditure on foreign owned R&D and do not complete step 3.3.1.

    The Definitions list defines Nil expenditure year.

    Step 3.3.1

    (A, B and C in table 6)

    (companies with a nil expenditure year for the Y-1, Y-2 and Y-3  years)

    If your company and all of its group members have established a new presence in Australia, write 0 at columns B, C and D in table 4 (for each line for which you have printed a company name) and at each line of item 1 in part E of the Research and development tax concession schedule 2011 (for which you have printed a company name) for the Y-1, Y-2 and Y-3 years of income.

    Also write 0 at A, B and C in table 6 and at Y-1, Y-2 and Y-3 in item 1 of Part E of the Research and development tax concession schedule 2011 for the relevant company. Go to step 3.4.

    Step 3.3.2

    (A, B and C in table 6)

    (companies without a nil expenditure year)

    A company that does not have a nil expenditure year will not be eligible to claim the foreign owned R&D incremental tax concession unless that company has the required three year history (refer to subsection 73QB(1) of the ITAA 1936) or was eligible to use the transitional rules when determining their entitlement to the foreign owned R&D incremental tax concession in the 2010 year of income.

    If the company was eligible to use the transitional rules in the 2008 and/or 2009 years of income

    If a company was eligible to use the transitional rules when calculating their entitlement to the foreign owned R&D incremental tax concession in the 2008 and/or 2009 year of income (please refer to Parts D&E of the Research and development tax concession schedule instructions 2011), the relevant amounts calculated for the company's 2008 and/or 2009 calculations apply again to its 2011 calculation, as set out below. Therefore, if the company was eligible to use the transitional rules:

    Go to step 3.4

    If the company was not eligible to use the transitional rules in the 2008 and/or 2009 years of income, however has the required three year history as detailed under 'Prerequisites for deduction' in subsection 73QB(1) of the ITAA 1936.

    Calculate the company's reduced notional expenditure on foreign owned R&D for the Y-1, Y-2 and Y-3 years of income as follows:

    Y-1 year of income:

    Use step 3.1 above (substituting Y0 for Y-1) and a blank copy of table 5 to calculate your reduced notional expenditure for the Y-1 year of income. Write this result at:

    Y-2 year of income:

    Use step 3.1 above (substituting Y0 for Y-2) and a blank copy of table 5 to calculate your reduced notional expenditure for the Y-2 year of income. Write this result at:

    Y-3 year of income:

    Use step 3.1 above (substituting Y0 for Y-3) and a blank copy of table 5 to calculate your reduced notional expenditure for the Y-3 year of income. Write this result at:

    Go to step 3.4

    If the company was not eligible to use the transitional rules in the 2008 and/or 2009 years of income and does not have the required 3 year history.

    A company that does not have a nil expenditure year will not be eligible to claim the foreign owned R&D incremental tax concession unless that company has the required three year history (refer to subsection 73QB(1) of the ITAA 1936) or was eligible to use the transitional rules in the 2008 and/or 2009 years of income. However, a company will still be required to work out their reduced notional expenditure on foreign owned R&D for the Y-1, Y-2 and Y-3 years of income if the company is calculating entitlement to the Australian owned R&D incremental tax concession.

    If the company is not eligible to claim the foreign owned R&D incremental tax concession leave K item 2 in part E of the Research and development tax concession schedule 2011 blank and print X in the No box at the top of part E of the Research and development tax concession schedule 2011.

    If the company is not also claiming the Australian owned R&D incremental tax concession, go to Part F - R&D Tax Offset (eligible Australian owned expenditure only).

    If the company is calculating entitlement to the Australian owned R&D incremental tax concession, calculate the company's reduced notional expenditure on foreign owned R&D as follows:

    Y-1 year of income:

    Use step 3.1 above (substituting Y0 for Y-1) and a blank copy of table 5 to calculate your reduced notional expenditure for the Y-1 year of income. Write this result at:

    Y-2 year of income:

    Use step 3.1 above (substituting Y0 for Y-2) and a blank copy of table 5 to calculate your reduced notional expenditure for the Y-2 year of income. Write this result at:

    Y-3 year of income:

    Use step 3.1 above (substituting Y0 for Y-3) and a blank copy of table 5 to calculate your reduced notional expenditure for the Y-3 year of income. Write this result at:

    Complete the remainder of step 3, and steps 4 and 5. You do not need to complete step 6.

    Step 3.4

    Repeat step 3.3 for each group member that is listed in table 4.

    Step 3.5

    You have now worked out the reduced notional expenditure on foreign owned R&D for the company and each other eligible company group member, if any, for the Y-1, Y-2 and Y-3 years.

    Add up the expenditures in each column of the additional tables to table 4 (if used) and write these in row e item 1 in part E of the Research and development tax concession schedule 2011, and row e in table 4 (the respective totals of each column in each of these should be the same).

    Total each of the columns A, B, C and D for the Y0, Y-1, Y-2 and Y-3 years of income in table 4 and write the results in row f of that table. Also include these totals at U, V, W and X, GROUP TOTALS item 1 in part E of the Research and development tax concession schedule 2011.

    Further:

    Write the group Y-1 amount at B in table 8.1.

    Write the group Y-2 amount at B in table 8.2.

    Write the group Y-3 amount at B in table 8.3.

    Step 3.6

    (D in table 6)

    For each company listed in table 4, use table 6 and the instructions below to add up:

    • the reduced notional expenditure on foreign owned R&D by the eligible company in its group membership period for the Y-1 year of income (A in table 6)
    • the reduced notional expenditure on foreign owned R&D by the eligible company in its group membership period for the Y-2 year of income (B in table 6), and
    • the reduced notional expenditure on foreign owned R&D by the eligible company in its group membership period for the Y-3 year of income (C in table 6).

    Write this result in D in table 6 and follow the transfer instructions at the bottom of that table.

    Step 3.6.1

    Repeat step 3.6 for each group member that is listed in table 4.

    Step 3.7

    (E in table 6)

    For the company, divide the result at D in table 6 (step 3.6) by 3. Write the result at E of that table and follow the transfer instructions at the bottom of that table.

    Step 3.7.1

    Repeat step 3.7 for each group member that is listed in table 4.

    Step 3.8

    (G in table 6)

    For the company, subtract the result of E in table 6 from the result of F in table 6 for the Y0 year of income. Write the result at G in table 6. The result is the 'change in expenditure on foreign owned R&D by the eligible company'. Transfer the result as directed at the bottom of table 6.

    Step 3.8.1

    Repeat step 3.8 for each group member that is listed in table 4.

    Step 3.9

    (H in table 6)

    The 'increase in expenditure on foreign owned R&D by the eligible company' is:

    a

    the change in expenditure on foreign owned R&D by the eligible company, or

    b

    zero, if the change in expenditure on foreign owned R&D by the eligible company is a negative number.

    If the result from G in table 6 is a negative number, write 0 at H in table 6. If your result from G in table 6 is a positive number, write that number at H in table 6. Transfer the result as directed at the end of that table.

    Step 3.9.1

    Repeat step 3.9 for each group member that is listed in table 4.

    Step 3.10

    Add up each of columns E, F, G and H of the additional tables to table 4 (if used) and write these in row e in table 4.

    Add up each of columns E, F, G and H in table 4 above. Write the results in row f in table 4, for each column.

    Further:

    • Write the result for row f of column G at B in table 14.
    • Write the result for row f of column G at D in table 15.
    • Write the result for row f of column G at C in table 17.
    • Write the result for row f of column H at B in table 17.

    You have now worked out the total increase in expenditure on foreign owned R&D by the eligible companies in the group and the net increase in expenditure on foreign owned R&D by the group.

    If the result in either row f of column G or row f of column H in table 4 is zero, leave K item 2 in part E of the Research and development tax concession schedule 2011 blank as you are ineligible for the foreign owned R&D incremental tax concession. Also print X in the No box at the top of part E of the Research and development tax concession schedule 2011.

    Go to step 4.

    Step 4

    For the purposes of determining your company's entitlement to the Australian owned R&D incremental tax concession and/or the foreign owned R&D incremental tax concession (sections 73QA and 73QB of the ITAA 1936), please complete table 7. Table 7 will calculate the 'adjusted increase in expenditure on R&D by the group' and follows the method statement set out in section 73RE of the ITAA 1936. Note that this calculation is based upon the relevant amounts for the group, in relation to expenditure on both Australian owned R&D and foreign owned R&D.

    Step 4.1

    (columns A, B and C in table 7)

    Calculate the R&D spend of the group for each of the Y-1, Y-2 and Y-3 years of income using tables 8.1 to 8.3, and write the results into C of each of those tables. Transfer the results as directed at the end of each table.

    Step 4.2

    (D in table 9 and D in table 10)

    If your expenditure has decreased in any of these years, complete this step to calculate the adjustment amounts for the Y0 year (AA0) and Y-1 year (AA-1) (section 73T of the ITAA 1936) using the instructions below. Transfer the results as directed at the end of each table.

    Attention

    If your expenditure has increased from the Y-3 year to the Y-2 year and from the Y-2 year to the Y-1 year, or your company meets the exception in subsection 73V(3) of the ITAA 1936, there is no need to complete this step, as you will have no adjustment amounts or adjustment balance. Go to step 4.4 and also write 0 at D in table 14.

    End of attention

    Adjustment amount for Y0 (AA0)

    You may need to make an adjustment if a company's R&D spend decreases in Y-1 to an amount that is less than 80% of that in the immediate prior year (Y-2).

    If this has occurred, AA0 for an eligible company and its group members for Y0 is:

    80% of R&D spend for Y-2 minus the R&D spend for Y-1

    Use table 9 to calculate your AA0 amount (if any).

    Exception
    If the requirements of subsection 73T(3) of the ITAA 1936 are met, AA0 will be zero. If this is the case, write 0 at D in table 9 and column D in table 7 and follow the transfer instructions at the bottom of table 9.

    Adjustment amount for Y-1 (AA-1)

    Similarly, you may need to make an adjustment if a company's R&D spend decreases in Y-2 to an amount that is less than 80% of that in the immediate prior year (Y-3).

    If this has occurred, AA-1 for an eligible company and its group members for Y-1 is:

    80% of R&D spend for Y-3 minus the R&D spend for Y-2

    Use table 10 to calculate your AA-1 amount (if any).

    Exception: If the requirements of subsection 73T(4) of the ITAA 1936 are met, AA-1 will be zero. In this case write 0 at D in table 10 and column E in table 7 and follow the transfer instructions at the bottom of table 10.

    Step 3

    (D in table 11 and either C in table 12 or F in table 13)

    Calculate the adjustment balance (section 73V of the ITAA 1936).

    If the company has no amounts, or zeros, at both column E and column F in table 7, go to step 4.4.

    Otherwise, calculate the running average for Y-1 (RA-1) using table 11 below, and transfer the result as directed.

    Is the R&D spend for Y-1 (column A in table 7) less than or equal to RA-1 (column F in table 7)?

    If yes, complete table 12, transfer the result as directed and go to step 4.4.

    If no, transfer RA-1 (F in table 7) to A in table 13 and complete that table to calculate the adjustment balance. Follow the instructions at the end of that table and go to step 4.4.

    Attention

    Do not complete both table 12 and table 13. Use the instructions in step 4.3 above to determine which table is relevant to your company's circumstances.

    End of attention

    Step 4.4

    Is the company and its group members' Y0 adjustment amount (AA0) and adjustment balance zero because the company or any of its group members was eligible to claim the increment in 2010 and subsections 73T(3) and/or 73V(3) of the ITAA 1936 apply?

    If yes, print X in the 2010: Yes box at item 2 in part D of the Research and development tax concession schedule 2011.

    If no, print X in the 2010: No box.

    Is the company and its group members' Y-1 adjustment amount (AA-1) zero because the company or any of its group members was eligible to claim the increment in 2009 and subsections 73T(4) and/or 73V(3) of the ITAA 1936 apply?

    If yes, print X in the 2009: Yes box at item 2 in part D of the Research and development tax concession schedule 2011.

    If no, print X in the 2009: No box.

    Attention

    If the exception in subsection 73V(3) of the ITAA 1936 applies to your company, ensure that you print X in both the 2010: Yes and 2009: Yes boxes.

    End of attention

    Step 4.5

    Calculate your adjusted increase in expenditure on R&D by the group using table 14 and the instructions in steps 4.5.1 to 4.5.2 below. Transfer the result as directed at the bottom of table 14.

    Step 4.5.1

    (C in table 14)

    Add together the following amounts:

    a

    the change in expenditure on Australian owned R&D by each eligible company in the group (A in table 14), and

    b

    the change in expenditure on foreign owned R&D by each eligible company in the group (B in table 14).

    Write the result at C in table 14.

    Note: If the result from step 4.5.1 is a negative number, the adjusted increase in expenditure on R&D by the group will be zero.

    Step 4.5.2

    (E in table 14)

    Subtract your adjustment balance (D in table 14) from C in table 14. This result is your adjusted increase in expenditure on R&D by the group. Write this result at E in table 14.

    If the result from step 4.5.2 is a negative number, the adjusted increase in expenditure on R&D by the group will be zero. In this case write 0 at E in table 14.

    Transfer the result as directed at the end of table 14.

    If the result at E in table 14 is zero, leave both M item 3 in part D and K item 2 in part E of the Research and development tax concession schedule 2011 blank as you are ineligible for both the Australian owned and foreign owned R&D incremental tax concessions. Also print X in the No box at the top of part D and in the No box at the top of part E of the Research and development tax concession schedule 2011

    Go to step 5.

    Attention

    If the result at E in table 14 is zero, you do not need to complete steps 5 and 6 of these instructions. Go to Part F - R&D tax offset (eligible Australian owned expenditure only).

    End of attention

    Step 5

    Calculate your extra deduction for increase in expenditure on Australian owned R&D (section 73QA of the ITAA 1936).

    Attention

    Do not complete step 5 if you have determined that your company is ineligible for the Australian owned R&D tax concession. Go to step 6.

    End of attention

    Step 5.1

    (I in table 15)

    Calculate your company's share of the Australian owned part of the adjusted increase in expenditure on R&D by the group.

    The formula for calculating the company's share of the Australian owned part of the adjusted increase in expenditure on R&D by the group is as follows:

    Formula for calculating the company's share of Australian owned part

    Use table 15 to calculate this amount, and transfer the result as directed at the end of that table.

    Step 5.2

    (B in table 16)

    Calculate your company's extra deduction for increase in expenditure on Australian owned R&D for the Y0 year of income using the instructions in table 16. Transfer this amount as directed at the end of this table.

    The result of this calculation is your company's extra deduction for increase in expenditure on Australian owned R&D for the Y0 year of income.

    Go to step 6.

    Step 6

    Calculate your extra deduction for increase in expenditure on foreign owned R&D (section 73QB of the ITAA 1936).

    Attention

    Do not complete step 6 if you have determined that your company is ineligible for the foreign owned R&D tax concession. Go to Part F - R&D tax offset (eligible Australian owned expenditure only).

    End of attention

    Step 6.1

    (I in table 17)

    Calculate your company's share of the foreign owned part of the adjusted increase in expenditure on R&D by the group.

    The formula for calculating the company's share of the foreign owned part of the adjusted increase in expenditure on R&D by the group is as follows:

    Formula for calculating the company's share of the foreign owned part

    Use table 17 to calculate this amount, and transfer the result as directed at the end of that table.

    Step 6.2

    (B in table 18)

    Calculate your company's extra deduction for increase in expenditure on foreign owned R&D for the Y0 year of income using the instructions in table 18. Transfer this amount as directed at the end of this table.

    The result of this calculation is your company's extra deduction for increase in expenditure on foreign owned R&D for the Y0 year of income.

    Go to Part F - R&D tax offset (eligible Australian owned expenditure only).

    Last modified: 01 Jun 2011QC 24211