Income Tax Assessment Act 1997



Division 355 - Research and Development  

Subdivision 355-E - Notional deductions etc. for decline in value of depreciating assets used for R & D activities  

SECTION 355-310   Notional application of Division 40  

In addition to its application apart from this section, Division 40 also applies with the changes set out in this section for the purposes of:

(a) paragraph 355-225(1)(b) (excluded expenditure); and

(b) paragraph 355-305(1)(c) ; and

(c) section 355-315 (balancing adjustments).

Firstly, substitute the following for references to a *taxable purpose in Subdivisions 40-A to 40-D (other than for the purposes of sections 40-100 , 40-105 and 40-110 ):

Replacing references to a taxable purpose
Item If this application of Division 40 is for the purposes of: Substitute a reference to:
1 paragraph 355-225(1)(b) or 355-305(1)(c) the purpose of conducting one or more of the *R & D activities covered by paragraph 355-305(1)(b)
2 section 355-315 the purpose of conducting one or more of the *R & D activities to which the R & D deductions (within the meaning of that section) relate


Sections 40-100 , 40-105 and 40-110 are about working out an asset ' s effective life. Those sections already refer to the use of the asset for R & D activities.

Secondly, assume that Division 40 does not apply to a building, nor to an extension, alteration or improvement to a building, (the building works ) for which the *R & D entity:

(a) can deduct amounts under Division 43 (capital works); or

(b) could deduct amounts under Division 43 :

(i) apart from expenditure being incurred, or the building works being started, before a particular day; or

(ii) had the R & D entity used the building works for a purpose relevant to those building works under section 43-140 (using an area in a deductible way).

Finally, assume that the following provisions had not been enacted:

(a) subsection 40-25(7) (meaning of taxable purpose);

(b) subsection 40-45(2) (assets to which Division 40 does not apply);

(c) section 40-425 (low-value pools);

(d) Subdivision 328-D (capital allowances for small business entities).


Subsection (3) and paragraph (4)(b) mean that deductions under section 355-305 may be available for capital works other than building works.


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