Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS

Division 355 - Research and Development

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History

Div 355 inserted by No 93 of 2011, s 3 and Sch 1 item 1, effective 8 September 2011.

No 93 of 2011, s 3 and Sch 4 items 1 to 6 contains the following application, savings and transitional provisions:

Schedule 4 - Application, savings and transitional provisions

Part 1 - Application provisions
1 Application of repeals and amendments
(1)
The repeals and amendments made by this Act apply:

(a) so far as they affect assessments - to assessments for income years commencing on or after 1 July 2011; and

(b) so far as they relate to income years but do not affect assessments - to income years commencing on or after 1 July 2011; and

(c) otherwise - to acts done or omitted to be done, states of affairs existing, or periods ending on or after the commencement of the first income year commencing on or after 1 July 2011.
Note:

For the purposes of an assessment for an income year commencing on or after 1 July 2011, regard may still be had to acts done or omitted to be done, states of affairs existing, or periods ending during an earlier income year. For example, regard may be had to expenditure incurred by other entities in income years commencing before 1 July 2011 for the purposes of paragraph 355-415(1)(b) of the Income Tax Assessment Act 1997 .

(2)
However, each of the following applies in relation to the 2011-12 financial year and all later financial years:

(a) section 29E of the Industry Research and Development Act 1986 (as inserted by Schedule 2);

(b) the repeal of paragraph 39H(b) of the Industry Research and Development Act 1986 ;

(c) section 46 of the Industry Research and Development Act 1986 (as amended by this Act).

Part 2 - General savings provisions
2 Object
2
The object of this Part is to ensure that, despite the repeals and amendments made by this Act, the full legal and administrative consequences of:

(a) any act done or omitted to be done; or

(b) any state of affairs existing; or

(c) any period ending;
before such a repeal or amendment applies, can continue to arise and be carried out, directly or indirectly through an indefinite number of steps, even if some or all of those steps are taken after the repeal or amendment applies.
3 Making and amending assessments, and doing other things etc., in relation to past matters
(1)
Even though a provision is repealed or amended by this Act, the repeal or amendment is disregarded for the purpose of doing any of the following under any Act or legislative instrument (within the meaning of the Legislative Instruments Act 2003 ):

(a) making or amending an assessment (including under a provision that is itself repealed or amended);

(b) exercising any right or power, performing any obligation or duty or doing any other thing (including under a provision that is itself repealed or amended);
in relation to any act done or omitted to be done, any state of affairs existing, or any period ending, before the repeal or amendment applies.

Note:

Examples of things covered by this subitem are as follows:

(a) an eligible company may object under Part IVC of the Taxation Administration Act 1953 in an income year commencing on or after 1 July 2011 about a notice given under former section 73I of the Income Tax Assessment Act 1936 for an income year commencing before 1 July 2011;

(b) an eligible company seeking registration under former section 39J of the Industry Research and Development Act 1986 for an income year commencing before 1 July 2011 may do so during an income year commencing on or after 1 July 2011;

(c) Innovation Australia may give a certificate under former section 39M of the Industry Research and Development Act 1986 in an income year commencing on or after 1 July 2011 about research and development activities registered for an income year commencing before 1 July 2011.

(2)
Even though a provision is repealed or amended by this Act, the repeal or amendment is disregarded so far as it relates to a state of affairs:

(a) that exists after the repeal or amendment applies; and

(b) that relates to:

(i) an act done or omitted to be done; or

(ii) a state of affairs existing; or

(iii) a period ending;
before the repeal or amendment applies.
Note:

Examples of things covered by this subitem are as follows:

(a) an amount may be included in an eligible company ' s assessable income under former subsection 73BF(4) of the Income Tax Assessment Act 1936 for an income year commencing on or after 1 July 2011 if the company receives in that income year an amount for the results of research and development activities for which the company had deductions under former section 73BA of that Act in an income year commencing before 1 July 2011;

(b) an eligible company ' s deduction under section 73B of the Income Tax Assessment Act 1936 for expenditure incurred during an income year commencing before 1 July 2011 is reduced because of section 73C of that Act if, in an income year commencing on or after 1 July 2011, the company receives a recoupment of that expenditure from the Commonwealth.

(3)
To avoid doubt, this item extends to the repeal of subsection 286-75(3) , and paragraph 286-80(2)(b) , in Schedule 1 to the Taxation Administration Act 1953 . In particular, if, in a particular case, the period in respect of which an administrative penalty is payable under subsection 286-75(3) in that Schedule:

(a) has not begun; or

(b) has begun but not ended;
when those provisions are repealed, then, despite the repeal, those provisions continue to apply in the particular case until the end of the period.

4 Saving of provisions about effect of assessments
4
If a provision or part of a provision that is repealed or amended by this Act deals with the effect of an assessment, the repeal or amendment is disregarded in relation to assessments made, before or after the repeal or amendment applies, in relation to any act done or omitted to be done, any state of affairs existing, or any period ending, before the repeal or amendment applies. 5 Repeals disregarded for the purposes of dependent provisions
5
If the operation of a provision (the subject provision ) of any Act or legislative instrument (within the meaning of the Legislative Instruments Act 2003 ) made under any Act depends to any extent on a provision that is repealed by this Act, the repeal is disregarded so far as it affects the operation of the subject provision. 6 Schedule does not limit operation of the Acts Interpretation Act 1901
6
This Schedule does not limit the operation of the Acts Interpretation Act 1901 .

Subdivision 355-B - Meaning of R & D activities and other terms

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SECTION 355-25 Core R & D activities

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Core R & D activities

355-25(1)
Core R & D activities are experimental activities:

(a) whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:

(i) is based on principles of established science; and

(ii) proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and

(b) that are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).

Activities that are not core R & D activities

355-25(2)
However, none of the following activities are core R & D activities :

(a) market research, market testing or market development, or sales promotion (including consumer surveys);

(b) prospecting, exploring or drilling for minerals or * petroleum for the purposes of one or more of the following:

(i) discovering deposits;

(ii) determining more precisely the location of deposits;

(iii) determining the size or quality of deposits;

(c) management studies or efficiency surveys;

(d) research in social sciences, arts or humanities;

(e) commercial, legal and administrative aspects of patenting, licensing or other activities;

(f) activities associated with complying with statutory requirements or standards, including one or more of the following:

(i) maintaining national standards;

(ii) calibrating secondary standards;

(iii) routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things;

(g) any activity related to the reproduction of a commercial product or process:

(i) by a physical examination of an existing system; or

(ii) from plans, blueprints, detailed specifications or publically available information;

(h) developing, modifying or customising computer software for the dominant purpose of use by any of the following entities for their internal administration (including the internal administration of their business functions):

(i) the entity (the developer ) for which the software is developed, modified or customised;

(ii) an entity * connected with the developer;

(iii) an * affiliate of the developer, or an entity of which the developer is an affiliate;

(i)

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an activity that relates to any of the following, unless the activity is covered by subsection (3) (harm minimisation purpose):

(i) a gambling service (within the meaning of the Interactive Gambling Act 2001 );

(ii) gambling;

(iii) a gambling-like practice;

(j)

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an activity that relates to any of the following, unless the activity is covered by subsection (4) (harm minimisation purpose):

(i) tobacco (see subsections (5) and (6) );

(ii) a tobacco product (as defined in section 9 of the Public Health (Tobacco and Other Products) Act 2023 );

(iii) a tobacco product accessory (as defined in section 10 of the Public Health (Tobacco and Other Products) Act 2023 );

(iv) a vaping good (as defined in section 41P of the Therapeutic Goods Act 1989 );

(v) tobacco extract;

(vi) goods where tobacco or tobacco extract is used or added during the manufacturing or processing of the goods (whether or not tobacco or tobacco extract remains in the goods);

(vii) goods containing nicotine that are intended for use or consumption by humans, other than food in which the only nicotine is naturally occurring.

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Harm minimisation purpose

355-25(3)

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An activity is covered by this subsection if the activity is conducted solely for the purpose of generating new knowledge about minimising harm from gambling services (within the meaning of the Interactive Gambling Act 2001 ), gambling or gambling-like practices, in relation to a person or the Australian community.

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355-25(4)

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An activity is covered by this subsection if the activity is conducted solely for the purpose of:

(a) generating new knowledge about the therapeutic use (within the meaning of the Therapeutic Goods Act 1989 ) of therapeutic goods (within the meaning of that Act) for minimising harm from a thing mentioned in any of subparagraphs (2)(j)(i) to (vii) ; or

(b) generating new knowledge about ceasing the ingestion or transfer of nicotine into the human body.

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Things treated as tobacco

355-25(5)

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For the purposes of this section, treat as tobacco any thing (including moisture) added to the tobacco leaf during manufacturing or processing.

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355-25(6)

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To avoid doubt, for the purposes of this section:

(a) treat tobacco seed, tobacco plant (whether or not in the ground) and tobacco leaf as tobacco; and

(b) treat cigars, cigarettes and snuff as tobacco.

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