INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS  

Division 355 - Research and Development  

Subdivision 355-J - Application to R & D partnerships  

SECTION 355-525   Balancing adjustments for R & D partnership assets only used for R & D activities  

355-525(1)  
This section applies to an *R & D entity (the partner ) if:


(a) a *balancing adjustment event happens in an income year (the event year ) for an asset *held by an *R & D partnership; and


(b) the R & D partnership cannot deduct an amount under section 40-25 , as that section applies apart from:


(i) this Division; and

(ii) former section 73BC of the Income Tax Assessment Act 1936 ;
for the asset for an income year; and


(c) the partner is entitled under section 355-100 to *tax offsets for one or more income years for deductions (the R & D deductions ) under section 355-520 for the asset; and


(d) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more *R & D activities for the event year; and


(e) if Division 40 applied with the changes described in section 355-310 (as affected by subsection 355-520(2) ):


(i) the R & D partnership could deduct for the event year an amount under subsection 40-285(2) for the asset and the balancing adjustment event; or

(ii) an amount would be included in the R & D partnership ' s assessable income for the event year under subsection 40-285(1) for the asset and the balancing adjustment event.
Note 1:

This section applies in a modified way if the partner has deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 355-325 of the Income Tax (Transitional Provisions) Act 1997 ).

Note 2:

Section 40-293 applies if the R & D partnership can deduct an amount under section 40-25 , as that section applies apart from this Division and former section 73BC of the Income Tax Assessment Act 1936 .

Notional deduction

355-525(2)  
If the *R & D partnership could deduct for the event year an amount under subsection 40-285(2) for the asset and the event if Division 40 applied as described in paragraph (1)(e), the partner can deduct the partner ' s proportion of that amount for the event year. Amount to be included in assessable income

355-525(3)  
If an amount (the section 40-285 amount ) would be included in the *R & D partnership ' s assessable income for the event year under subsection 40-285(1) for the asset and the event if Division 40 applied as described in paragraph (1)(e), the partner ' s proportion of the sum of:


(a) that amount; and


(b) the following amount;

is included in the partner ' s assessable income for the event year:


Adjusted section 40-285 amount × 1
3

where:

adjusted section 40-285 amount
means so much of the section 40-285 amount as does not exceed the total decline in value.

total decline in value
means the asset ' s *cost, less its *adjustable value, worked out under Division 40 as it applies as described in paragraph (1)(e).

Amount to be included in assessable income may be reduced if notional deductions exceeded $100 million

355-525(4)  


For the purposes of subsection (3), the partner may choose to reduce the adjusted section 40-285 amount in that subsection if:


(a) subsection 355-100(3) applied to the partner for an earlier income year or the event year (the excess year ); and


(b) the partner ' s deductions for the excess year included deductions covered by paragraph (1)(c) of this section for the asset.

355-525(5)  


Subsection 355-720(3) applies to the partner as if a reduction under subsection (2) of that section for the present year included a reduction under subsection (4) of this section for the event year.

355-525(6)  


The way the partner prepares its income tax returns is sufficient evidence of the making of a choice under subsection (4).

355-525(7)  


A choice under subsection (4) is irrevocable.

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