Division 355 - Research and Development  

Subdivision 355-C - Entitlement to tax offset  

SECTION 355-100   Entitlement to tax offset  

If notional deductions are between $20,000 and $100 million


An *R&D entity is entitled to a *tax offset for an income year equal to the percentage, set out in the table, of the total of the amounts (if any) that the entity can deduct for the income year under any or all of the following provisions:

(a) section 355-205 (R&D expenditure);

(b) section 355-305 (decline in value of R&D assets);

(c) section 355-315 (balancing adjustment for R&D assets);

(d) section 355-480 (earlier year associate R&D expenditure);

(e) section 355-520 (decline in value of R&D partnership assets);

(f) section 355-525 (balancing adjustment for R&D partnership assets);

(g) section 355-580 (CRC contributions).

Rate of R&D tax offset
Item In this case: The percentage is:
1 the *R&D entity's *aggregated turnover for the income year is less than $20 million (and item 2 of this table does not apply) 43.5%
2 at any time during the income year an *exempt entity, or combination of exempt entities, would control the *R&D entity in a way described in section 328-125 (connected entities) if:
(a) references in section 328-125 to 40% were references to 50%; and
(b) subsection 328-125(6) were ignored
3 any other case 38.5%


The tax offset will be a refundable tax offset if the percentage applicable to the entity is 43.5% (see section 67-30).

If notional deductions are less than $20,000

However, if the total of those amount is less than $20,000, the *R&D entity is instead entitled to a *tax offset for the income year equal to that percentage of the total of the following kinds of expenditure (if any):

Expenditure not subject to $20,000 threshold
Item Kind of expenditure
1 Expenditure:
(a) that the *R&D entity can deduct under section 355-205 (R&D expenditure) for the income year; and
(b) that was incurred to a research service provider (within the meaning of the Industry Research and Development Act 1986) that is not an *associate of the R&D entity or of the relevant *R&D partnership (as appropriate); and
(c) that was for the provider to provide services, within a research field for which the provider is registered under Division 4 of Part III of that Act, applicable to one or more of the *R&D activities to which the deduction relates
2 Expenditure that the *R&D entity can deduct under section 355-580 (CRC contributions) for the income year

If notional deductions exceed $100 million


Despite subsection (1), if the total of those amounts exceeds $100 million, the *R&D entity is instead entitled to a *tax offset for the income year equal to the sum of:

(a) that percentage of $100 million; and

(b) the product of the excess and the *corporate tax rate.


The R&D entity may be able to reduce related amounts that would otherwise be:

  • (a) included in its assessable income because of a balancing, or feedstock, adjustment; or
  • (b) payable as extra income tax because of an R&D recoupment;
  • (see section 355-720).

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