Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1A) This section has effect subject to Division 245 of the Income Tax Assessment Act 1997 .
(1) The following payments made, and expenditure incurred, during the year of income (other than any amount which is allowable as a deduction under any other section of this Act) by a person carrying on a business for the purpose of gaining or producing assessable income shall be allowable deductions:
(a) Payments to:
(i) an approved research institute for scientific research related to that business; or
(ii) an approved research institute, the object of which is the undertaking of scientific research related to the class of business to which that business belongs; and
(b) Expenditure of a capital nature on scientific research related to that business (except to the extent that it is expenditure on plant, machinery, land or buildings or on alterations, additions or extensions to buildings or in the acquisition of rights in or arising out of scientific research).
(2) Where, on or after the first day of the year of income ending on 30 June 1946, a taxpayer carrying on a business for the purpose of gaining or producing assessable income incurs expenditure of a capital nature in the construction or acquisition of a building, or part of a building, or in making any alteration or addition to a building, in which scientific research related to that business is to be carried on by or on behalf of the taxpayer, and the building, part of a building, alteration or addition, as the case may be, is of use for scientific research purposes only, an amount equal to one - third of that expenditure shall be an allowable deduction:
(a) from the assessable income of the year of income in which the building, part of a building, alteration or addition is first used by or on behalf of the taxpayer for such scientific research; and
(b) from the assessable income of each of the 2 years of income next succeeding that year of income, if the taxpayer continues to carry on that business during the year in which that assessable income was derived.
(2A) Subsection (2) does not apply to expenditure incurred by a taxpayer in the construction of a building or part of a building, in the making of an alteration or addition to a building or in the acquisition of a building or part of a building unless:
(a) either of the following subparagraphs applies:
(i) that construction or making commenced, or that acquisition occurred, before 21 November 1987;
(ii) any contract in respect of that construction, making or acquisition was entered into before 21 November 1987; and
(b) if the expenditure was incurred after 20 November 1987--the taxpayer intended, on 20 November 1987, that:
(i) scientific research, being research related to a business carried on by the taxpayer for the purpose of gaining or producing assessable income, would be carried on by or on behalf of the taxpayer in the building; and
(ii) the building, part of the building, alteration or addition, as the case may be, would be of use for scientific research purposes only.
(3) Where any expenditure or payment to which this section refers is incurred or made outside Australia and the business in relation to which it is so incurred or made is carried on partly in and partly out of Australia, the deduction allowable under this section shall be such part of the amount which would otherwise be allowable as the Commissioner considers reasonable in the circumstances.
(4) Where any expenditure has been allowed or is allowable as a deduction under subsection (2) and:
(a) the taxpayer sells, transfers or otherwise disposes of the building or any part thereof; or
(b) the building or any part thereof is destroyed;
the termination value of the building or part shall, to the extent of the expenditure so allowed or allowable as a deduction, be included in the assessable income of the year of income in which the disposal or destruction occurs:
Provided that where the Commissioner is of opinion that part only, or no part, of that termination value relates to the disposal or destruction of any property which was acquired or created by that expenditure, that part only, or no part, as the case may be, of the termination value shall be taken into account for the purposes of this subsection.
(4A) If:
(a) a person has purchased from another person a building, or part of a building, where the vendor had incurred capital expenditure of a kind in respect of which deductions are or have been allowable under subsection (2); and
(b) it would be concluded that, having regard to any connection between the vendor and the purchaser or to any other relevant circumstances, those persons were not dealing with each other at arm's length; and
(c) the purchase price is greater or lesser than the market value of the building, or the part of the building, at the time of the purchase;
the purchase price is, for all purposes of the application of this Act in relation to the vendor, taken to have been the amount of the market value of the property at the time of the purchase.
(5) If the purchase of the building is a creditable acquisition by the vendor, references in subsection (4A) to the purchase price are taken to be references to that price reduced by the amount of the net input tax credit to which the purchaser is entitled for the acquisition.
(6) In this section:
"an approved research institute" means the Commonwealth Scientific and Industrial Research Organization, or any university, college, institute, association or organization which is approved in writing for the purposes of this section by that Organization, by the Chief Executive Officer of the NHMRC or by the Research Secretary, as an institution, association or organization for undertaking scientific research which is or may prove to be of value to Australia.
"NHMRC" means the National Health and Medical Research Council established by section 5B of the National Health and Medical Research Council Act 1992 .
"Research Secretary" means the Secretary of the Department administered by the Minister administering the Australian Research Council Act 2001 .
"scientific research" means any activities in the fields of natural or applied science for the extension of knowledge.
"termination value" has the meaning given by subsection 995 - 1(1) of the Income Tax Assessment Act 1997 .
(7) An approval for the purposes of subsection (6) may:
(a) operate as from a date, whether before or after the date of the approval, specified in the instrument of approval; and
(b) be withdrawn at any time.
(8) In this section, any reference to scientific research related to a business or class of business shall be read as including a reference to:
(i) any scientific research which may lead to or facilitate an extension, or an improvement in the technical efficiency, of that business, or, as the case may be, of businesses of that class; and
(ii) any scientific research of a medical nature which is of special relation to the welfare of workers employed in that business or, as the case may be, in businesses of that class.
(9) This section does not apply in relation to payments made, or expenditure incurred, after 30 June 1995.