Commonwealth Consolidated Acts

INCOME TAX (TRANSITIONAL PROVISIONS) ACT 1997 - SECT 355.320

R&D entity has old law R&D decline in value deductions

  (1)   This section applies to an R&D entity if:

  (a)   a balancing adjustment event happens in an income year (the event year ) commencing on or after 1   July 2011 for an asset held by the R&D entity; and

  (b)   the R&D entity cannot deduct an amount under section   40 - 25 of the Income Tax Assessment Act 1997 (the new Act ), as that section applies apart from:

  (i)   Division   355 of that Act; and

  (ii)   former section   73BC of the Income Tax Assessment Act 1936 (the old Act );

    for the asset for an income year; and

  (c)   either or both of the following subparagraphs apply:

  (i)   the R&D entity can deduct (the old law deductions ) under former section   73BA or 73BH of the old Act an amount for one or more income years for the asset;

  (ii)   the R&D entity chooses tax offsets under former section   73I of the old Act instead of deductions (also the old law deductions ) under those former sections for one or more income years for the asset; and

  (d)   the R&D entity 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 of the new Act applied as described in subsection   (2) of this section:

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

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

Note 1:   This section applies even if the R&D entity is entitled under section   355 - 100 of the new Act to tax offsets for one or more income years for deductions under section   355 - 305 of that Act for the asset.

Note 2:   Section   40 - 292 of this Act may apply if paragraph   (c), but not paragraph   (b), of this subsection is satisfied.

Changed application of Division   40

  (2)   For the purposes of paragraph   (1)(e), assume that Division   40 of the new Act applied with the changes described in section   355 - 310 of that Act, but with these changes to that section:

Deduction

  (3)   If the R&D entity could deduct for the event year an amount under subsection   40 - 285(2) of the new Act for:

  (a)   the asset; and

  (b)   the event;

if Division   40 of that Act applied as described in subsection   (2) of this section, the R&D entity is taken to be able to deduct under subsection   355 - 315(2) of the new Act that amount for the event year.

Amount to be included in assessable income

  (4)   If an amount (the section   40 - 285 amount ) would be included in the R&D entity's assessable income for the event year under subsection   40 - 285(1) of the new Act for the asset and the event if Division   40 of that Act applied as described in subsection   (2) of this section, the sum of:

  (a)   that amount; and

  (b)   the following amount;

is taken to be included in the R&D entity's assessable income for the event year under subsection   355 - 315(3) of the new Act:

where:

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

"old law 1.25 rate" deductions means the sum of the R&D entity's notional Division   40 deductions, and notional Division   42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions.

"total decline in value" means the asset's cost, less its adjustable value, worked out under Division   40 of the new Act as it applies as described in subsection   (2).

Application of Division   355

  (4A)   In applying Division   355 of the new Act in relation to the asset for the income year, if the R&D entity is entitled under section   355 - 100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions ) under section   355 - 305 for the asset, the R&D entity is taken to have:

  (a)   if an amount is taken to be included in the R&D entity's assessable income for the event year as mentioned in subsection   (4) of this section--a clawback amount under section   355 - 446 of the new Act for the income year equal to the amount mentioned in subsection   (4B) of this section; or

  (b)   if the R&D entity is taken to be able to deduct an amount as mentioned in subsection   (3) of this section--a catch up amount under section   355 - 465 of the new Act for the income year equal to the amount of that deduction.

  (4B)   The amount is the following:

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 of the new Act as it applies as described in subsection   (2) of this section.

Normal rules do not apply for the asset and the event

  (5)   Neither of the following sections:

  (a)   section   355 - 315 of the new Act;

  (b)   former section   73BF of the old Act (as that section applies because of Part   2 of Schedule   4 to the Tax Laws Amendment (Research and Development) Act 2011 );

to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event.

Note 1:   Section   355 - 315 of the new Act would otherwise apply for the event in a case where the R&D entity had new law deductions.

Note 2:   Former section   73BF of the old Act would otherwise apply for the event in respect of the old law deductions.