Income Tax Assessment Act 1997

s 328-475 — Small business restructures involving assets already subject to small business roll ‑ over

If: (a) section 328 ‑ 455 applies in relation to the transfer of an asset (the transferred asset ) of the transferor’s business to one or more transferees; and (b) the transferor has previously chosen a small business roll ‑ over under Subdivision 152 ‑ E for a * CGT event that happened in relation to a * CGT asset for which the transferred asset is a replacement asset (within the meaning of sections 104 ‑ 185, 104 ‑ 190, 104 ‑ 197 and 104 ‑ 198); sections 104 ‑ 185, 104 ‑ 190, 104 ‑ 197 and 104 ‑ 198 apply to each transferee (to the extent of the transferee’s interest in the asset) as if the transferee, and not the transferor, made that choice. Note: Sections 104 ‑ 185, 104 ‑ 190, 104 ‑ 197 and 104 ‑ 198 provide for capital gains to arise under CGT events J2, J5 and J6, after the choice of a small business roll ‑ over under Subdivision 152 ‑ E has deferred the making of a capital gain.

Amendment history: Inserted by No 18 of 2016, effective 1 Apr 2016 (s 2(1) item 1)

s 355-1 — What this Division is about

An R&D entity may be entitled to a tax offset for R&D activities. The tax offset may be a refundable tax offset if the R&D entity’s aggregated turnover is less than $20 million. To be entitled to the tax offset, the R&D entity needs one or more notional deductions under this Division. There are 2 main kinds of notional deductions. One is for expenditure on R&D activities. The other is for the decline in value of tangible depreciating assets used for R&D activities. Note: All of these notional deductions require the R&D entity to be registered for the R&D activities under Part III of the Industry Research and Development Act 1986 .

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-5 — Object

(1) The object of this Division is to encourage industry to conduct research and development activities that might otherwise not be conducted because of an uncertain return from the activities, in cases where the knowledge gained is likely to benefit the wider Australian economy. (2) This object is to be achieved by providing a tax incentive for industry to conduct, in a scientific way, experimental activities for the purpose of generating new knowledge or information in either a general or applied form (including new knowledge in the form of new or improved materials, products, devices, processes or services).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-20 — R&D activities

R&D activities are * core R&D activities or * supporting R&D activities.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-25 — Core R&D activities

Core R&D activities (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 (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 publicly 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) 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) 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. Harm minimisation purpose (3) 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. (4) 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. Things treated as tobacco (5) For the purposes of this section, treat as tobacco any thing (including moisture) added to the tobacco leaf during manufacturing or processing. (6) 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.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 58 of 2026, effective sch 1, 4: 1 July 2026 (s 2(1) items 2, 3)

s 355-30 — Supporting R&D activities

(1) Supporting R&D activities are activities directly related to * core R&D activities. (2) However, if an activity: (a) is an activity referred to in subsection 355 ‑ 25(2); or (b) produces goods or services; or (c) is directly related to producing goods or services; the activity is a supporting R&D activity only if it is undertaken for the dominant purpose of supporting * core R&D activities. Gambling and tobacco related activities etc. (3) If an activity relates to a matter or thing referred to in any of subparagraphs 355 ‑ 25(2)(i)(i) to (iii) (which deal with gambling etc.): (a) subsection (2) does not apply to the activity; and (b) despite subsection (1), the activity is a supporting R&D activity only if it is covered by subsection 355 ‑ 25(3) (harm minimisation purpose). (4) If an activity relates to a thing referred to in any of subparagraphs 355 ‑ 25(2)(j)(i) to (vii) (which deal with tobacco and vaping goods etc.): (a) subsection (2) does not apply to the activity; and (b) despite subsection (1), the activity is a supporting R&D activity only if it is covered by subsection 355 ‑ 25(4) (harm minimisation purpose).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 58 of 2026, effective sch 1, 4: 1 July 2026 (s 2(1) items 2, 3)

s 355-35 — R&D entities

(1) Each of the following is an R&D entity : (a) a body corporate incorporated under an * Australian law; (b) a body corporate incorporated under a * foreign law that is an Australian resident. Note: Each of the above paragraphs extends to a body corporate acting in its capacity as trustee of a public trading trust (see subsection 102T(9) of the Income Tax Assessment Act 1936 ). (2) A body corporate incorporated under a * foreign law that: (a) is a resident of a foreign country for the purposes of an agreement in force between that country and Australia that: (i) is a double tax agreement (as defined in Part X of the Income Tax Assessment Act 1936 ); and (ii) includes a definition of permanent establishment ; and (b) carries on business in Australia through a permanent establishment (within the meaning of that definition) of the body corporate in Australia; is an R&D entity to the extent that it carries on business through that permanent establishment. (3) However, an * exempt entity cannot be an R&D entity .

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-100 — Entitlement to tax offset

If notional deductions are between $20,000 and $150 million (1) An * R&D entity is entitled to a * tax offset for an income year equal to the percentage, set out in the table, of the total of the amounts (if any) that the entity can deduct for the income year under any or all of the following provisions: (a) section 355 ‑ 205 (R&D expenditure); (b) section 355 ‑ 305 (decline in value of R&D assets); (d) section 355 ‑ 480 (earlier year associate R&D expenditure); (e) section 355 ‑ 520 (decline in value of R&D partnership assets); (g) section 355 ‑ 580 (CRC contributions). Rate of R&D tax offset Item In this case: The percentage is: 1 the * R&D entity’s * aggregated turnover for the income year is less than $20 million (and item 2 of this table does not apply) the R&D entity’s * corporate tax rate for the income year, plus 18.5 percentage points 2 at any time during the income year an * exempt entity, or combination of exempt entities, would control the * R&D entity in a way described in section 328 ‑ 125 (connected entities) if: (a) references in section 328 ‑ 125 to 40% were references to 50%; and (b) subsection 328 ‑ 125(6) were ignored the R&D entity’s * corporate tax rate for the income year 3 any other case the R&D entity’s * corporate tax rate for the income year Note 1: The tax offset will be a refundable tax offset if item 1 of the table applies (see section 67 ‑ 30). Note 2: The tax offset is increased under subsection (1A) of this section if item 2 or 3 of the table applies. R&D premium (1A) If item 2 or 3 of the table in subsection (1) applies to the * R&D entity, the amount of the * tax offset for the income year is increased by the sum of the amounts (if any) worked out for each item of the following table for that entity: Tiered offset rates Item Work out the part of the total amount mentioned in subsection 355 ‑ 100(1) that: Multiply that part by this percentage: 1 exceeds nil but does not exceed 2% of the * R&D entity’s total expenses for the income year worked out under section 355 ‑ 115 8.5% 2 exceeds 2% of the * R&D entity’s total expenses for the income year worked out under section 355 ‑ 115 16.5% If notional deductions are less than $20,000 (2) However, if the total amount mentioned in subsection (1) is less than $20,000, the * R&D entity is instead entitled to a * tax offset for the income year, worked out in accordance with subsections (1) and (1A), as if that amount were instead the total of the following kinds of expenditure (if any): Expenditure not subject to $20,000 threshold Item Kind of expenditure 1 Expenditure: (a) that the * R&D entity can deduct under section 355 ‑ 205 (R&D expenditure) for the income year; and (b) that was incurred to a research service provider (within the meaning of the Industry Research and Development Act 1986 ) that is not an * associate of the R&D entity or of the relevant * R&D partnership (as appropriate); and (c) that was for the provider to provide services, within a research field for which the provider is registered under Division 4 of Part III of that Act, applicable to one or more of the * R&D activities to which the deduction relates 2 Expenditure that the * R&D entity can deduct under section 355 ‑ 580 (CRC contributions) for the income year If notional deductions exceed $150 million (3) Despite subsections (1) and (1A), if the total amount mentioned in subsection (1) exceeds $150 million, the * R&D entity is instead entitled to a * tax offset for the income year equal to the sum of: (a) the amount worked out in accordance with those subsections as if that amount were $150 million; and (b) the product of the excess and the R&D entity’s * corporate tax rate for the income year.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 124 of 2013, effective Sch 1 (items 37–45), Sch 5 (items 7, 8(1)), Sch 7, Sch 8, Sch 10 (items 1–11, 13): 29 June 2013 (s 2(1) items 2, 10–12) Sch 2 (items 2–6, 21–42, 48): 11 July 2013 (s 2(1) item 3) Sch 2 (item 66): 11 July 2013 (s 2(1) item 5) Sch 10 (item 14): never commenced (s 2(1) item 13) Sch 11 (items 1–3): 3 Dec 2012 (s 2(1) item 15) Sch 11 (items 5, 6, 9): 28 June 2013 (s 2(1) item 16) Sch 11 (items 28, 32(1), 35–56): 30 June 2013 (s 2(1) items 18, 20, 22) | Amended by No 13 of 2015, effective Sch 1 (items 1–6, 9): 5 Mar 2015 (s 2(1) item 2) Sch 1 (items 10–14, 17): repealed before commencing (s 2(1) item 3) | Amended by No 55 of 2016, effective Sch 3 (items 16–19): 1 July 2017 (s 2(1) item 4) Sch 4 (items 9–13): 1 Jan 2017 (s 2(1) item 5) Sch 22 and Sch 23 (items 2, 3, 22–24): 1 Oct 2016 (s 2(1) item 25) | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-105 — Deductions under this Division are notional only

(1) An amount (the notional amount ) that an * R&D entity can deduct under this Division is disregarded except for the purposes of: (a) working out whether the R&D entity is entitled under section 355 ‑ 100 to a * tax offset; and (b) a provision (of this Act or any other Act) that refers to an entitlement of the R&D entity under section 355 ‑ 100 to a tax offset; and (c) a provision (of this Act or any other Act) that: (i) prevents some or all of the notional amount from being deducted; or (ii) changes the income year for which some or all of the notional amount can be deducted; and Note: Examples are Divisions 26 and 27 of this Act, Subdivision H of Division 3 of Part III of the Income Tax Assessment Act 1936 and Part IVA of that Act. (d) a provision (of this Act or any other Act) that includes an amount in assessable income wholly or partly because of the notional amount; and Note: An example is Subdivision 20 ‑ A, which may include in assessable income a recoupment of a loss or outgoing if the entity can deduct an amount for the loss or outgoing. (e) a provision (of this Act or any other Act) that excludes expenditure from: (i) the * cost base or * reduced cost base of a * CGT asset; or (ii) an element of that cost base or reduced cost base. Note: An example is section 110 ‑ 45, which may exclude deductible expenditure from elements of the cost base of an asset. (2) Subsection (1) does not apply to amounts that the * R&D entity can deduct under the following: (a) subsection 355 ‑ 315(2); (b) subsection 355 ‑ 475(1); (c) subsection 355 ‑ 525(2).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-110 — Notional deductions include prepaid expenditure

For the purposes of this Division, if: (a) apart from Subdivision H (prepaid expenditure) of Division 3 of Part III of the Income Tax Assessment Act 1936 , an * R&D entity can deduct an amount under section 355 ‑ 205 or 355 ‑ 480 for an income year (the present year ) or an earlier income year; and (b) that Subdivision applies to the calculation of that amount; and (c) the entity can deduct an amount, as a result of that application of that Subdivision, for the present year; the entity is taken to be able to deduct under section 355 ‑ 205 or 355 ‑ 480 (as appropriate) the amount referred to in paragraph (c) for the present year. Note: Section 355 ‑ 205 is about deductions for R&D expenditure. Section 355 ‑ 480 is about deductions for earlier year associate R&D expenditure.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-115 — Working out an R&D entity’s total expenses

(1) For the purposes of subsection 355 ‑ 100(1A), an * R&D entity’s total expenses for an income year is the sum of the amounts covered by subsection (2). (2) The following amounts are covered by this subsection: (a) the * R&D entity’s total expenses for the income year worked out in accordance with: (i) the * accounting principles; or (ii) if accounting principles do not apply in relation to the R&D entity—commercially accepted principles relating to accounting; (b) any amount the R&D entity can deduct for the income year as mentioned in subsection 355 ‑ 100(1), to the extent the amount is not covered by paragraph (a) for the income year. Amounts counted once only (3) For the purposes of subsection (2): (a) disregard an amount to which paragraph (2)(a) otherwise applies if paragraph (2)(b) has previously applied in relation to the amount; and (b) disregard an amount to which paragraph (2)(b) otherwise applies if paragraph (2)(a) has previously applied in relation to the amount.

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-200 — What this Subdivision is about

An R&D entity can notionally deduct its expenditure on registered R&D activities for which certain conditions are met. There are special conditions for R&D activities conducted for foreign residents.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-205 — When notional deductions for R&D expenditure arise

(1) An * R&D entity can deduct for an income year (the present year ) expenditure it incurs during that year to the extent that the expenditure: (a) is incurred on one or more * R&D activities: (i) for which the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for an income year; and (ii) that are activities to which section 355 ‑ 210 (conditions for R&D activities) applies; and (b) if the expenditure is incurred to the R&D entity’s * associate—is paid to that associate during the present year. Note 1: If the matters in subparagraphs (a)(i) and (ii) are not satisfied until a later income year, the R&D entity will need to wait until then before it can deduct the expenditure for the present year. Note 2: The R&D activities will need to be conducted during the income year the R&D entity is registered for those activities (see sections 27A and 27J of the Industry Research and Development Act 1986 ). Note 3: The entity may also be able to deduct expenditure incurred to an associate in an earlier income year (see section 355 ‑ 480). Note 4: Expenditure incurred in income years starting on or after 1 July 2011 may be deductible for activities registered for income years starting before 1 July 2011 (see section 355 ‑ 200 of the Income Tax (Transitional Provisions) Act 1997 ). (2) This section has effect subject to section 355 ‑ 225 (excluded expenditure), Subdivision 355 ‑ F (integrity rules) and subsection 355 ‑ 580(3) (CRC contributions).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-210 — Conditions for R&D activities

(1) An * R&D activity covered by one or more of the following paragraphs is an activity to which this section applies: (a) the R&D activity is conducted for the * R&D entity solely within Australia; (b) if the R&D entity is a body corporate carrying on business through a permanent establishment (as described in subsection 355 ‑ 35(2))—the R&D activity is conducted: (i) for the body corporate; but (ii) not for the purposes of that permanent establishment; and the conditions in section 355 ‑ 215 (activities conducted for a body corporate by its permanent establishment) are met for the R&D activity; (c) the R&D activity is conducted for one or more foreign residents who are each: (i) incorporated under a * foreign law; and (ii) a resident of a foreign country for the purposes of an agreement of a kind described in subsection 355 ‑ 35(2); and the conditions in section 355 ‑ 220 (activities conducted for a foreign entity) are met for the R&D activity; (d) the R&D activity is: (i) conducted for the R&D entity solely outside Australia; and (ii) covered by a finding in force under paragraph 28C(1)(a) of the Industry Research and Development Act 1986 ; (e) the R&D activity consists of several parts, with: (i) some parts being conducted for the R&D entity solely within Australia; and (ii) the other parts being conducted for the R&D entity outside Australia while covered by a finding in force under paragraph 28C(1)(a) of the Industry Research and Development Act 1986 . Note: An activity can be covered by a finding under paragraph 28C(1)(a) of the Industry Research and Development Act 1986 if the activity cannot be conducted in Australia. (2) However, an * R&D activity is not an activity to which this section applies if the activity is conducted, to a significant extent, for one or more other entities not covered by any paragraph of subsection (1). Note: An entity would not be covered by, for example, paragraph (1)(c) if the conditions in section 355 ‑ 220 were not met for the R&D activity in relation to that entity.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 15 of 2017, effective Sch 1 (item 1): 1 Mar 2017 (s 2(1) item 2) Sch 2 and Sch 4 (items 26–69, 71–83): 1 Apr 2017 (s 2(1) items 3, 8, 10) Sch 4 (item 70): 19 Mar 2015 (s 2(1) item 9)

s 355-215 — R&D activities conducted by a permanent establishment for other parts of the body corporate

For the purposes of paragraph 355 ‑ 210(1)(b), the conditions for an * R&D activity are as follows: (a) the R&D activity is conducted solely within Australia; (b) if the R&D activity is a * supporting R&D activity, each corresponding * core R&D activity must be: (i) an activity conducted, or to be conducted, solely within Australia; and (ii) an activity for which the * R&D entity is or has been registered under section 27A of the Industry Research and Development Act 1986 , or could be registered for an income year if that core R&D activity were conducted during the income year; (c) there is written evidence that the R&D activity is conducted for the body corporate but not for the purposes of that permanent establishment. Note: The body corporate is the R&D entity to the extent that it carries on business through that permanent establishment (see subsection 355 ‑ 35(2)).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 15 of 2017, effective Sch 1 (item 1): 1 Mar 2017 (s 2(1) item 2) Sch 2 and Sch 4 (items 26–69, 71–83): 1 Apr 2017 (s 2(1) items 3, 8, 10) Sch 4 (item 70): 19 Mar 2015 (s 2(1) item 9)

s 355-220 — R&D activities conducted for a foreign entity

(1) For the purposes of paragraph 355 ‑ 210(1)(c), the conditions for an * R&D activity conducted for one or more foreign residents are as follows: (a) the R&D activity is conducted solely within Australia; (b) if the R&D activity is a * supporting R&D activity, each corresponding * core R&D activity must be: (i) an activity conducted, or to be conducted, solely within Australia; and (ii) an activity for which the * R&D entity is or has been registered under section 27A of the Industry Research and Development Act 1986 , or could be registered for an income year if that core R&D activity were conducted during the income year; (c) when the R&D activity is conducted: (i) each foreign resident is * connected with the R&D entity; or (ii) for each foreign resident—either the foreign resident is an * affiliate of the R&D entity or the R&D entity is an affiliate of the foreign resident; (d) the R&D activity is conducted: (i) in accordance with a written agreement binding on only the R&D entity and each foreign resident; and (ii) either directly by the R&D entity, or indirectly by another entity under an agreement binding on the R&D entity; (e) the R&D activity is not conducted in connection with an agreement covered by subsection (2). Note: An example of conducting an R&D activity indirectly under a contract is conducting the R&D activity under a subcontract, or one of a chain of subcontracts, under the contract. (2) An agreement is covered by this subsection if: (a) the agreement is binding on the R&D entity (the first entity ) and an R&D entity that: (i) is * connected with the first entity; or (ii) has the first entity as an * affiliate, or is an affiliate of the first entity; while the * R&D activity is conducted; and (b) the R&D activity is to be conducted under the agreement by the first entity or by an entity: (i) who is not bound by the agreement; and (ii) who is to conduct the R&D activity directly or indirectly under another agreement to which the first entity is, or will become, bound. Note: One effect of this subsection is that, even if the R&D entity has an agreement with the foreign resident for conducting the R&D activity, the R&D entity cannot deduct expenditure incurred: (a) for conducting the R&D activity as a subcontractor under a subcontract with an affiliated R&D entity; or (b) if the R&D entity is a subcontractor to an affiliated R&D entity—for further subcontracting the conducting of the R&D activity.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 15 of 2017, effective Sch 1 (item 1): 1 Mar 2017 (s 2(1) item 2) Sch 2 and Sch 4 (items 26–69, 71–83): 1 Apr 2017 (s 2(1) items 3, 8, 10) Sch 4 (item 70): 19 Mar 2015 (s 2(1) item 9)

s 355-225 — Expenditure that cannot be notionally deducted

Expenditure on buildings, certain assets and interest (1) Sections 355 ‑ 205 (deductions for R&D expenditure) and 355 ‑ 480 (deductions for earlier year associate R&D expenditure) do not apply to the following expenditure: (a) expenditure incurred to acquire or construct: (i) a building or a part of a building; or (ii) an extension, alteration or improvement to a building; (b) expenditure included in the * cost of a tangible * depreciating asset for the purposes of Division 40 (as that Division applies as described in section 355 ‑ 310 or otherwise); (c) expenditure incurred for interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936 ) payable to an entity. Note 1: Expenditure covered by paragraph (a) may be deductible under Division 43 (capital works). Note 2: The decline in value of an asset covered by paragraph (b) may be notionally deductible under section 355 ‑ 305. Note 3: Expenditure covered by paragraph (c) may be deductible under section 8 ‑ 1. Expenditure on core technology (2) Sections 355 ‑ 205 (deductions for R&D expenditure) and 355 ‑ 480 (deductions for earlier year associate R&D expenditure) do not apply to expenditure incurred in acquiring, or in acquiring the right to use, technology wholly or partly for the purposes of one or more * R&D activities if: (a) a purpose of the R&D activities was or is: (i) to obtain new knowledge based on that technology; or (ii) to create new or improved materials, products, devices, processes, techniques or services to be based on that technology; or (b) the R&D activities were or are an extension, continuation, development or completion of the activities that produced that technology.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-300 — What this Subdivision is about

An R&D entity can notionally deduct the decline in value of a tangible depreciating asset used for R&D activities. If a balancing adjustment event later happens for the asset, the R&D entity may be able to actually deduct a further amount. Alternatively, an amount may be included in the R&D entity’s assessable income.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-305 — When notional deductions for decline in value arise

(1) If: (a) an * R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for an income year (the present year ) for one or more * R&D activities that are activities to which section 355 ‑ 210 (conditions for R&D activities) applies; and (b) while a tangible * depreciating asset is * held by the R&D entity during the present year, the asset is used for the purpose of conducting one or more of those R&D activities; and (c) the R&D entity could deduct an amount under section 40 ‑ 25 for the asset for the present year if Division 40 applied with the changes described in section 355 ‑ 310; and (d) the R&D entity cannot deduct an amount for the asset for: (i) an earlier income year under Subdivision 328 ‑ D (capital allowances for small business entities); or (ii) an earlier income year under Division 40 (as that Division applies apart from this Division), in a case where section 40 ‑ 440 (low ‑ value pools) applied; the R&D entity can deduct the amount referred to in paragraph (c) for the present year. (2) This section has effect subject to subsection 355 ‑ 580(4) (CRC contributions).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-310 — Notional application of Division 40

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

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-315 — Balancing adjustments—assets only used for R&D activities

(1) This section applies to an * R&D entity if: (a) a * balancing adjustment event happens in an income year (the event year ) for an asset * held by the R&D entity; and (b) the R&D entity 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 R&D entity is entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions (the R&D deductions ) under section 355 ‑ 305 for the asset; and (d) the 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 applied with the changes described in section 355 ‑ 310: (i) the entity 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 entity’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 entity also has deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 355 ‑ 320 of the Income Tax (Transitional Provisions) Act 1997 ). Note 2: Section 40 ‑ 292 applies if the entity 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 . (2) If the * R&D entity 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 R&D entity can deduct that amount for the event year. Note 1: A deduction under this subsection is not a notional deduction (see subsection 355 ‑ 105(2)). Note 2: A deduction under this subsection results in a catch up amount for the R&D entity (see section 355 ‑ 465). (3) If an amount would be included in the * R&D entity’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), that amount is included in the R&D entity’s assessable income for the event year. Note: Some or all of the amount included in the R&D entity’s assessable income may result in a clawback amount for the R&D entity (see section 355 ‑ 446).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-400 — Expenditure incurred while not at arm’s length

If: (a) an * R&D entity incurs expenditure to another entity on all or part of an * R&D activity; and (b) either: (i) when the R&D entity incurs the expenditure, the R&D entity and the other entity do not deal with each other at * arm’s length; or (ii) the other entity is the R&D entity’s * associate; and (c) the expenditure exceeds the * market value of the relevant R&D activity or part (as appropriate); for the purposes of this Division, the R&D entity is treated as if the amount of expenditure it incurred on the relevant R&D activity or part (as appropriate) were equal to that market value. Note: For the purposes of a deduction under section 355 ‑ 305 or 355 ‑ 520 for an asset’s decline in value, the arm’s length rules in Division 40 apply as part of the notional application of that Division under that section.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 101 of 2013, effective Sch 2 (items 2, 20–43, 50): 29 June 2013 (s 2(1) item 3) Sch 2 (items 55–57): 8 Sept 2012 (s 2(1) item 4) | Amended by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7)

s 355-405 — Expenditure not at risk

(1) An * R&D entity cannot deduct expenditure under section 355 ‑ 205 or 355 ‑ 480 if: (a) when it incurs the expenditure, the R&D entity or its * associate had received, or could reasonably be expected to receive, consideration: (i) as a direct or indirect result of the expenditure being incurred; and (ii) regardless of the results of the activities on which the expenditure is incurred; and (b) that consideration is equal to or greater than the expenditure. Note: Section 355 ‑ 205 is about deductions for R&D expenditure. Section 355 ‑ 480 is about deductions for earlier year associate R&D expenditure. (2) If: (a) when an * R&D entity incurs expenditure, the R&D entity or its * associate had received, or could reasonably be expected to receive, consideration: (i) as a direct or indirect result of the expenditure being incurred; and (ii) regardless of the results of the activities on which the expenditure is incurred; and (b) that consideration is less than the expenditure; the R&D entity cannot deduct under section 355 ‑ 205 or 355 ‑ 480 so much of the expenditure as is equal to the consideration. (3) For the purposes of paragraphs (1)(a) and (2)(a), have regard to: (a) anything that happened or existed before or at the time the expenditure is incurred; and (b) anything that is likely to happen or exist after that time. (4) This section does not apply to expenditure incurred on * R&D activities covered by paragraph 355 ‑ 210(1)(b) or (c). Note: Those paragraphs cover R&D activities conducted for foreign residents.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-410 — Disposal of R&D results

(1) This section applies to an * R&D entity if: (a) the R&D entity is entitled under section 355 ‑ 100 to a * tax offset because it can: (i) deduct under section 355 ‑ 205 or 355 ‑ 480 expenditure incurred on * R&D activities; or (ii) deduct under section 355 ‑ 305 or 355 ‑ 520 an amount for an asset (the R&D asset ) used for the purpose of conducting one or more R&D activities; and (b) the R&D entity receives or becomes entitled to receive one or more of the following amounts (the results amounts ) in an income year (the results year ): (i) an amount for the results of any of the R&D activities; (ii) an amount from granting access to, or the right to use, any of those results; (iii) an amount attributable to the R&D entity having incurred the expenditure, including an amount it is entitled to receive regardless of the results of the R&D activities; (iv) an amount attributable to the R&D asset being used for the purpose mentioned in subparagraph (a)(ii), including an amount the R&D entity is entitled to receive regardless of the results of the R&D activities; (v) an amount from * disposing of a * CGT asset, or from granting a right to occupy or use a CGT asset, where the disposal or grant resulted in another person acquiring a right to access or use any of those results. Note: This section also applies with changes to the partners of an R&D partnership (see section 355 ‑ 535). (2) For each results amount, the following amount is included in the * R&D entity’s assessable income for the results year: (a) if the results amount is only a results amount because of subparagraph (1)(b)(v), and the asset referred to in that subparagraph is a * depreciating asset—an amount equal to the extent (if any) that the results amount exceeds the asset’s * cost just before the disposal or grant; (b) if the results amount is only a results amount because of subparagraph (1)(b)(v), and the asset referred to in that subparagraph is not a depreciating asset—an amount equal to the extent (if any) that the results amount exceeds the asset’s * cost base just before the disposal or grant; (c) otherwise—the results amount. (3) For the purposes of paragraph (2)(a), assume that subsection 40 ‑ 45(2) did not, except in the case of buildings and extensions, alterations and improvements to buildings, prevent Division 40 from applying to certain capital works.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-415 — Reducing deductions to reflect mark ‑ ups within groups

(1) This section applies to an * R&D entity if: (a) the R&D entity can deduct an amount under section 355 ‑ 205 or 355 ‑ 480 for an income year for one or more * R&D activities; and (b) one or more other entities (the grouped entities ) incurred expenditure during the income year, or an earlier income year, on one or more of those * R&D activities; and (c) when each grouped entity incurred the expenditure: (i) the grouped entity was * connected with the R&D entity; or (ii) the grouped entity was an * affiliate of the R&D entity or the R&D entity was an affiliate of the grouped entity. Note: Section 355 ‑ 205 is about deductions for R&D expenditure. Section 355 ‑ 480 is about deductions for earlier year associate R&D expenditure. Reducing deductions by group mark ‑ ups (2) The amount the * R&D entity can deduct, apart from this section, under section 355 ‑ 205 or 355 ‑ 480 for the income year is reduced by the amount (the reduction amount ) worked out as follows: Method statement Step 1. For each grouped entity, work out the sum of the amounts derived during the income year, or an earlier income year, by the grouped entity for goods or services relating to one or more of the * R&D activities while: (a) the grouped entity was * connected with the * R&D entity; or (b) the grouped entity was an * affiliate of the R&D entity or the R&D entity was an affiliate of the grouped entity. Step 2. From the sum of those amounts, subtract the actual cost to each grouped entity of providing the goods or services that correspond to those amounts. If R&D entity has deductions for both R&D expenditure and earlier year associate R&D expenditure (3) However, if the * R&D entity can deduct amounts under both sections 355 ‑ 205 and 355 ‑ 480 for the income year, those amounts are reduced as follows: (a) apply the reduction amount to reduce the amount otherwise deductible under section 355 ‑ 205 (but not below zero); and (b) then apply any remainder of the reduction amount to reduce the amount otherwise deductible under section 355 ‑ 480 (but not below zero). Disregard mark ‑ ups already taken into account (4) For the purposes of step 1 of the method statement in subsection (2), disregard any of the amounts from that step that have already been taken into account under this section for the * R&D entity and the * R&D activities for an earlier income year.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-430 — What this Subdivision is about

An amount is included in an R&D entity’s assessable income if: (a) the R&D entity receives a recoupment from government of expenditure on R&D activities for which it has obtained tax offsets under this Division; or (b) the R&D entity can deduct under this Division expenditure on goods, materials or energy used during R&D activities to produce marketable products or products applied to the R&D entity’s own use; or (c) a balancing adjustment event happens for an asset held by the R&D entity (or an R&D partnership in which the R&D entity is a partner) for which tax offsets have been obtained under this Division and for which an amount is otherwise included in the R&D entity’s (or R&D partnership’s) assessable income. Table of sections Operative provisions 355 ‑ 435 When this Subdivision applies 355 ‑ 440 R&D recoupments 355 ‑ 445 Feedstock adjustments 355 ‑ 446 Balancing adjustments for assets only used for R&D activities 355 ‑ 447 Balancing adjustments for assets partially used for R&D activities 355 ‑ 448 Balancing adjustments for R&D partnership assets only used for R&D activities 355 ‑ 449 Balancing adjustments for R&D partnership assets partially used for R&D activities 355 ‑ 450 Amount to be included in assessable income

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Repealed and substituted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-435 — When this Subdivision applies

This Subdivision applies to an * R&D entity for an income year (the present year ) if: (a) the R&D entity has an amount (a clawback amount ) under section 355 ‑ 440, 355 ‑ 445, 355 ‑ 446, 355 ‑ 447, 355 ‑ 448 or 355 ‑ 449 for the present year; and (b) the R&D entity has received, or is entitled to receive, a * tax offset under section 355 ‑ 100 for one or more income years (each an offset year ) in relation to that clawback amount.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Repealed and substituted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-440 — R&D recoupments

(1) The * R&D entity has an amount under this section if: (a) the entity, or another entity mentioned in subsection (5), receives or becomes entitled to receive a * recoupment from either of the following (otherwise than under the * CRC program): (i) an * Australian government agency; (ii) an STB (within the meaning of Division 1AB of Part III of the Income Tax Assessment Act 1936 ); and (b) the recoupment is received, or the entitlement to receive the recoupment arises, during the present year; and (c) either: (i) the recoupment is of expenditure incurred on or in relation to certain activities; or (ii) the recoupment requires expenditure (the project expenditure ) to have been incurred, or to be incurred, on certain activities. Note: Paragraph (c) includes expenditure incurred in purchasing a tangible depreciating asset to be used when conducting R&D activities. (2) The amount is equal to the sum of: (a) so much of the expenditure referred to in subsection (1) that is deducted under this Division; and (b) for each asset (if any) for which expenditure referred to in subsection (1) is included in the asset’s * cost—each amount (if any) equal to the asset’s decline in value that is deducted under this Division; that is taken into account in working out * tax offsets under section 355 ‑ 100 obtained by the * R&D entity for one or more income years. Note: Paragraphs (a) and (b) of this subsection refer to amounts notionally deducted under this Division (see section 355 ‑ 105). Amount is reduced by any repayments of the recoupment (3) For the purposes of subsection (2), reduce the expenditure referred to in subparagraph (1)(c)(i) by any repayments of the * recoupment during an income year. Cap on extra income tax if recoupment relates to a project (4) Despite subsection (2), if the * recoupment is covered by subparagraph (1)(c)(ii), the amount mentioned in subsection (2) for the present year cannot exceed the amount worked out using the following formula: where: net amount of the recoupment means the total amount of the * recoupment, less any repayments of the recoupment during an income year. R&D expenditure means the amount mentioned in subsection (2), disregarding subsection (3). Related entities (5) The other entities for the purposes of paragraph (1)(a) are as follows: (a) an entity * connected with the * R&D entity; (b) an * affiliate of the R&D entity or an entity of which the R&D entity is an affiliate.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Repealed and substituted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-445 — Feedstock adjustments

(1) The * R&D entity has an amount under this section if: (a) it incurs expenditure in one or more income years in acquiring or producing goods, or materials, (the feedstock inputs ) transformed or processed during * R&D activities in producing one or more tangible products (the feedstock outputs ); and (b) it obtains under section 355 ‑ 100 * tax offsets for one or more income years (each an offset year ) for deductions under this Division: (i) for the expenditure; or (ii) for expenditure it incurs on any energy input directly into the transformation or processing; or (iii) for the decline in value of assets used in acquiring or producing the feedstock inputs; and (c) during the present year, a feedstock output, or a transformed feedstock output, (the marketable product ), is: (i) * supplied by the R&D entity to another entity; or (ii) applied by the R&D entity to the R&D entity’s own use, other than use for the purpose of transforming that product for supply. (2) The amount is equal to the lesser of: (a) the * feedstock revenue for the feedstock output; and (b) so much of the total of the amounts deducted as described in paragraph (1)(b) as is reasonably attributable to the production of the feedstock output. (3) Subsection (2) does not apply to the feedstock output if: (a) it becomes, or is transformed into, a feedstock input; or (b) that subsection already applies to the feedstock output because of the application of paragraph (1)(c) to: (i) an earlier time during the present year; or (ii) an earlier income year. (4) The feedstock revenue , for the feedstock output, is worked out using the following formula: where: market value of the marketable product means the marketable product’s * market value at the time it is: (a) * supplied by the * R&D entity to the other entity; or (b) first applied by the R&D entity to the R&D entity’s own use, other than use for the purpose of transforming that product for supply. (5) This section applies to a * supply or use of the marketable product by: (a) an entity * connected with the * R&D entity; or (b) an * affiliate of the R&D entity or an entity of which the R&D entity is an affiliate; as if it were by the R&D entity.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Repealed and substituted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-446 — Balancing adjustments for assets only used for R&D activities

(1) The * R&D entity has an amount under this section if: (a) a * balancing adjustment event happens in the present year for an asset * held by the R&D entity; and (b) the R&D entity cannot deduct, for the asset for an income year, 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 ; and (c) the R&D entity is entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions under section 355 ‑ 305 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 present year; and (e) an amount (the section 40 ‑ 285 amount ) is included in the R&D entity’s assessable income for the present year under subsection 355 ‑ 315(3) for the asset and the balancing adjustment event. Note 1: This section applies in a modified way if the entity also has deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 355 ‑ 320 of the Income Tax (Transitional Provisions) Act 1997 ). Note 2: Section 40 ‑ 292 applies if the entity 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 . (2) The amount is so much of an amount equal to the section 40 ‑ 285 amount as does not exceed the difference between: (a) the asset’s * cost; and (b) the asset’s * adjustable value, worked out under Division 40 as if that Division applied with the changes described in section 355 ‑ 310.

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-447 — Balancing adjustments for assets partially used for R&D activities

(1) The * R&D entity has an amount under this section if: (a) a * balancing adjustment event happens in the present year for an asset * held by the R&D entity and for which: (i) the R&D entity can deduct, for an income year, an amount under section 40 ‑ 25, as that section applies apart from Division 355 and former section 73BC of the Income Tax Assessment Act 1936 ; or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if the R&D entity had used the asset; and (b) the R&D entity is entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions (the R&D deductions ) under section 355 ‑ 305 for the asset; and (c) an amount (the section 40 ‑ 285 amount ) is included in the R&D entity’s assessable income for the asset under section 40 ‑ 285 (after applying subsection 40 ‑ 292(2)) for the present year . Note: This section applies in a modified way if you have deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 40 ‑ 292 of the Income Tax (Transitional Provisions) Act 1997 ). (2) The amount is worked out as follows: where: adjusted section 40 ‑ 285 amount means so much of an amount equal to the section 40 ‑ 285 amount as does not exceed the total decline in value. total decline in value means the * cost of the asset less its * adjustable value.

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-448 — Balancing adjustments for R&D partnership assets only used for R&D activities

(1) The * R&D entity (the partner ) has an amount under this section if: (a) the partner is a partner in an * R&D partnership; and (b) a * balancing adjustment event happens in the present year for an asset * held by the R&D partnership; and (c) the R&D partnership cannot deduct, for the asset for an income year, 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 ; and (d) the partner is entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions under section 355 ‑ 520 for the asset; and (e) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more * R&D activities for the present year; and (f) an amount (the section 40 ‑ 285 amount ) would, as mentioned in subsection 355 ‑ 525(3), be included in the R&D partnership’s assessable income for the present year 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 . (2) The amount is the partner’s proportion of the amount that is so much of an amount equal to the section 40 ‑ 285 amount as does not exceed the difference between: (a) the asset’s * cost; and (b) the asset’s * adjustable value, worked out under Division 40 as if that Division applied with the changes described in section 355 ‑ 310.

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-449 — Balancing adjustments for R&D partnership assets partially used for R&D activities

(1) The * R&D entity (the partner ) has an amount under this section if: (a) the partner is a partner in an * R&D partnership; and (b) a * balancing adjustment event happens in the present year for a * depreciating asset * held by the R&D partnership and for which: (i) the R&D partnership can deduct, for an income year, an amount under section 40 ‑ 25, as that section applies apart from Division 355 and former section 73BC of the Income Tax Assessment Act 1936 ; or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (c) one or more partners (including the partner) in the R&D partnership are entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions under section 355 ‑ 520 for the asset; and (d) an amount (the section 40 ‑ 285 amount ) is included in the R&D partnership’s assessable income for the asset under section 40 ‑ 285 (after applying subsection 40 ‑ 293(2)) for the present year. (2) The amount is the partner’s proportion of the amount worked out as follows: where: adjusted section 40 ‑ 285 amount means so much of an amount equal to the section 40 ‑ 285 amount as does not exceed the total decline in value. total decline in value means the * cost of the asset less its * adjustable value. total R&D deductions means the sum of each partner’s deductions mentioned in paragraph (1)(c) of this section.

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-450 — Amount to be included in assessable income

(1) The * R&D entity must include, in the entity’s assessable income for the present year, the sum of the following amounts for each offset year relating to the clawback amount: where: adjusted offset means the * tax offset the R&D entity would have received under section 355 ‑ 100 for the offset year if the total amount mentioned in subsection 355 ‑ 100(1) for that tax offset were reduced by the portion of the clawback amount that is attributable to the offset year. deduction amount means the portion of the clawback amount that is attributable to the offset year, multiplied by the R&D entity’s * corporate tax rate for the offset year. starting offset means the amount of the * tax offset the R&D entity has received, or is entitled to receive, under section 355 ‑ 100 for the offset year. (2) However, if this section, or section 355 ‑ 475, has previously applied (whether in the present year or an earlier income year) in relation to another clawback amount, or catch up amount, the * R&D entity has that relates to the offset year, subsection (1) of this section applies as if: (a) the starting offset were the * tax offset the R&D entity would have received under section 355 ‑ 100 for the offset year if the total amount mentioned in subsection 355 ‑ 100(1) were: (i) decreased by the sum of the portions of any such other clawback amounts that are attributable to the offset year; and (ii) increased by the sum of the portions of any such other catch up amounts that are attributable to the offset year; and (b) the reference to the “total amount” in the definition of adjusted offset were a reference to that amount as so adjusted.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Repealed and substituted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-455 — What this Subdivision is about

An R&D entity can deduct an amount under this Subdivision if: (a) a balancing adjustment event happens for an asset held by the R&D entity (or an R&D partnership in which the R&D entity is a partner); and (b) tax offsets have been obtained under this Division for deductions for the asset; and (c) the R&D entity (or the R&D partnership) can otherwise deduct an amount for the asset and the balancing adjustment event. Table of sections Operative provisions 355 ‑ 460 When this Subdivision applies 355 ‑ 465 Assets only used for R&D activities 355 ‑ 466 Assets partially used for R&D activities 355 ‑ 467 R&D partnership assets only used for R&D activities 355 ‑ 468 R&D partnership assets partially used for R&D activities 355 ‑ 475 Amount that can be deducted

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-460 — When this Subdivision applies

This Subdivision applies to an * R&D entity for an income year (the present year ) if: (a) the R&D entity has an amount (a catch up amount ) under section 355 ‑ 465, 355 ‑ 466, 355 ‑ 467 or 355 ‑ 468 for an asset for the present year; and (b) the R&D entity has received, or is entitled to receive, a * tax offset under section 355 ‑ 100 for one or more income years (each an offset year ) in relation to the asset.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Repealed and substituted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-465 — Assets only used for R&D activities

(1) The * R&D entity has an amount under this section if: (a) a * balancing adjustment event happens in the present year for an asset * held by the R&D entity; and (b) the R&D entity cannot deduct, for the asset for an income year, 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 ; and (c) the R&D entity is entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions under section 355 ‑ 305 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 present year; and (e) the R&D entity can deduct, for the present year, an amount under subsection 355 ‑ 315(2) for the asset and the balancing adjustment event. Note 1: This section applies in a modified way if the entity also has deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 355 ‑ 320 of the Income Tax (Transitional Provisions) Act 1997 ). Note 2: Section 40 ‑ 292 applies if the entity 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 . (2) The amount is an amount equal to the amount mentioned in paragraph (1)(e).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Repealed and substituted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-466 — Assets partially used for R&D activities

(1) The * R&D entity has an amount under this section if: (a) a * balancing adjustment event happens in the present year for an asset * held by the R&D entity for which: (i) the R&D entity can deduct, for an income year, an amount under section 40 ‑ 25, as that section applies apart from Division 355 and former section 73BC of the Income Tax Assessment Act 1936 ; or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if the R&D entity had used the asset; and (b) the R&D entity is entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions (the R&D deductions ) under section 355 ‑ 305 for the asset; and (c) the R&D entity can deduct an amount (the section 40 ‑ 285 amount ) for the asset under section 40 ‑ 285 (after applying subsection 40 ‑ 292(2)) for the present year. Note: This section applies in a modified way if you have deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 40 ‑ 292 of the Income Tax (Transitional Provisions) Act 1997 ). (2) The amount is worked out as follows: where: total decline in value means the * cost of the asset less its * adjustable value.

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-467 — R&D partnership assets only used for R&D activities

(1) The * R&D entity (the partner ) has an amount under this section if: (a) the partner is a partner in an * R&D partnership; and (b) a * balancing adjustment event happens in the present year for an asset * held by the * R&D partnership; and (c) the R&D partnership cannot deduct, for the asset for an income year, 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 ; and (d) the partner is entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions under section 355 ‑ 520 for the asset; and (e) the partner is registered under section 27A of the Industry Research and Development Act 1986 for one or more * R&D activities for the present year; and (f) the partner can deduct an amount under subsection 355 ‑ 525(2) for the present year for the asset and the balancing adjustment event. (2) The amount is an amount equal to the amount mentioned in paragraph (1)(f).

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-468 — R&D partnership assets partially used for R&D activities

(1) The * R&D entity (the partner ) has an amount under this section if: (a) the partner is a partner in an * R&D partnership; and (b) a * balancing adjustment event happens in the present year for a * depreciating asset * held by the R&D partnership and for which: (i) the R&D partnership can deduct, for an income year, an amount under section 40 ‑ 25, as that section applies apart from Division 355 and former section 73BC of the Income Tax Assessment Act 1936 ; or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (c) one or more partners (including the partner) in the R&D partnership are entitled under section 355 ‑ 100 to * tax offsets for one or more income years for deductions under section 355 ‑ 520 for the asset; and (d) the R&D partnership can deduct an amount (the section 40 ‑ 285 amount ) for the asset under section 40 ‑ 285 (after applying subsection 40 ‑ 293(2)) for the present year. Note: This section applies in a modified way if the partners have deductions for the asset under former section 73BA or 73BH of the Income Tax Assessment Act 1936 (see section 40 ‑ 293 of the Income Tax (Transitional Provisions) Act 1997 ). (2) The amount is the partner’s proportion of the amount worked out as follows: where: total decline in value means the * cost of the asset less its * adjustable value. total R&D deductions means the sum of each partner’s deductions mentioned in paragraph (1)(c) of this section.

Amendment history: Inserted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-475 — Amount that can be deducted

(1) The * R&D entity can deduct, for the present year, the sum of the following amounts for each offset year relating to the catch up amount: where: adjusted offset means the * tax offset the R&D entity would have received under section 355 ‑ 100 for the offset year if the total amount mentioned in subsection 355 ‑ 100(1) for that tax offset were increased by the portion of the catch up amount that is attributable to the offset year. deduction amount means the portion of the catch up amount that is attributable to the offset year, multiplied by the R&D entity’s * corporate tax rate for the offset year. starting offset means the amount of the * tax offset the R&D entity has received, or is entitled to receive, under section 355 ‑ 100 for the offset year. Note: A deduction under this subsection is not a notional deduction: see subsection 355 ‑ 105(2). (2) However, if this section, or section 355 ‑ 450, has previously applied (whether in the present year or an earlier income year) in relation to another catch up amount, or clawback amount, the * R&D entity has that relates to the offset year, subsection (1) of this section applies as if: (a) the starting offset were the * tax offset the R&D entity would have received under section 355 ‑ 100 for the offset year if the total amount mentioned in subsection 355 ‑ 100(1) were: (i) increased by the sum of the portions of any such other catch up amounts that are attributable to the offset year; and (ii) decreased by the sum of the portions of any such other clawback amounts that are attributable to the offset year; and (b) the reference to the “total amount” in the definition of adjusted offset were a reference to that amount as so adjusted.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Repealed and substituted by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-480 — Notional deductions for expenditure incurred to associate in earlier income years

Notional deductions for earlier year associate expenditure (1) An * R&D entity can deduct for an income year (the present year ) expenditure it incurred to its * associate during an earlier income year to the extent that: (a) the expenditure was incurred on one or more * R&D activities: (i) for which the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for an income year; and (ii) that are activities to which section 355 ‑ 210 (conditions for R&D activities) applies; and (b) the expenditure is paid to that associate during the present year; and (c) subsection (2) applies to the expenditure. Note 1: This section applies in a modified way to R&D partnership expenditure (see sections 355 ‑ 510 and 355 ‑ 515). Note 2: Expenditure paid in income years starting on or after 1 July 2011 may be deductible for activities registered for income years starting before 1 July 2011 (see section 355 ‑ 200 of the Income Tax (Transitional Provisions) Act 1997 ). Expenditure cannot have been otherwise deducted etc. (2) This subsection applies to the expenditure if: (a) the * R&D entity can deduct the expenditure, or is entitled to a * tax offset for the expenditure, under any other Division of this Act for an earlier income year; and (b) by the time of lodging its * income tax return for the most recent income year before the present year, the R&D entity had neither: (i) deducted the expenditure; nor (ii) obtained a tax offset for the expenditure; as described in paragraph (a). (3) The entitlement to the deduction, or * tax offset, described in paragraph (2)(a) ceases to the extent that subsection (2) applies to the expenditure. Example: If, by the time mentioned in paragraph (2)(b), an R&D entity chose to deduct only a third of the expenditure it could have deducted under another Division, then the remaining 2 thirds of that expenditure: (a) can be deducted under this section; but (b) can no longer be deducted under the other Division. Notional deduction is subject to integrity rules etc. (4) This section has effect subject to section 355 ‑ 225 (excluded expenditure), Subdivision 355 ‑ F (integrity rules) and subsection 355 ‑ 580(3) (CRC contributions).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-500 — What this Subdivision is about

This Subdivision modifies the rules in this Division for partners of R&D partnerships. In particular, the rules about deducting R&D expenditure are modified to allow a partner to deduct the partner’s proportion of the R&D partnership’s expenditure on R&D activities. A partner of an R&D partnership may also be able to deduct under this Subdivision the decline in value of partnership assets used for R&D activities.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-505 — Meaning of R&D partnership and partner’s proportion

(1) A partnership is an R&D partnership at a particular time if, at that time, each of the partners is an * R&D entity. (2) For an amount attributable to an * R&D partnership for an income year, each partner of the R&D partnership is taken to bear or be entitled to (as appropriate) this proportion (the partner’s proportion ) of the amount: (a) the proportion the partners agreed the partner should bear or be entitled to (as appropriate); or (b) if there is no such agreement—the proportion of the partner’s interest in the * net income or * partnership loss of the R&D partnership for the income year.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-510 — R&D partnership expenditure on R&D activities

If an * R&D partnership incurs expenditure on one or more R&D activities during an income year, this Division applies in relation to each * R&D entity that is a partner of the R&D partnership at some time during the income year as if: (a) the partner incurred the partner’s proportion of that expenditure when the R&D partnership incurred that expenditure; and (b) neither the R&D partnership, nor any other partner of the R&D partnership, incurred expenditure during the income year on the R&D activities; and (c) such other changes were made to this Division as are appropriate having regard to that partner’s proportion of amounts attributable to the R&D partnership. Note: This section and section 355 ‑ 515 may result in: (a) the partner being able to deduct the partner’s proportion of the partnership expenditure under section 355 ‑ 205 (R&D expenditure) or 355 ‑ 480 (earlier year associate R&D expenditure) for the R&D activities; and (b) the partner being affected by the integrity rules in Subdivisions 355 ‑ F, 355 ‑ G and 355 ‑ H.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-515 — R&D activities conducted by or for an R&D partnership

If one or more * R&D activities are conducted by or for an * R&D partnership during an income year, this Division applies in relation to each * R&D entity that is a partner of the R&D partnership at some time during the income year as if: (a) the R&D activities were conducted by or for the partner in a corresponding way to the way the R&D activities were conducted by or for the R&D partnership; and (b) the partner had relationships with other entities in relation to the R&D activities that corresponded to the relationships the R&D partnership had with those other entities in relation to the R&D activities; and (c) a thing done by, or in relation to, the R&D partnership in relation to the R&D activities were a thing done by, or in relation to, the partner; and (d) the R&D activities were neither: (i) conducted by or for the R&D partnership; nor (ii) conducted by or for any other partner of the R&D partnership; and (e) such other changes were made to this Division as are appropriate having regard to that partner’s proportion of amounts attributable to the R&D partnership. Note 1: For the purposes of this Division, entities that are associates or affiliates of, or connected with, the R&D partnership are taken to be associates or affiliates of, or connected with, the partner (see paragraph (b)). Note 2: For the purposes of this Division, payments and agreements made by the R&D partnership for the R&D activities are taken to be made by the partner (see paragraph (c)).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-520 — When notional deductions arise for decline in value of depreciating assets of R&D partnerships

When notional deductions arise (1) If: (a) an * R&D entity is a partner of an * R&D partnership at some time during an income year (the present year ); and (b) the partner is registered under section 27A of the Industry Research and Development Act 1986 for the present year for one or more * R&D activities that are activities to which section 355 ‑ 210 (conditions for R&D activities) applies; and Note: Section 355 ‑ 210 applies with changes for this paragraph (see section 355 ‑ 515). (c) while a tangible * depreciating asset is * held by the R&D partnership during the present year, the asset is used for the purpose of conducting one or more of those R&D activities; and (d) the R&D partnership could deduct an amount under section 40 ‑ 25 for the asset for the present year if Division 40 applied with the changes described in section 355 ‑ 310; and Note: Section 355 ‑ 310 applies with changes for this paragraph (see subsection (2) of this section). (e) the R&D partnership cannot deduct an amount for the asset for: (i) an earlier income year under Subdivision 328 ‑ D (capital allowances for small business entities); or (ii) an earlier income year under Division 40 (as that Division applies apart from this Division), in a case where section 40 ‑ 440 (low ‑ value pools) applied; the partner can deduct the partner’s proportion of the amount referred to in paragraph (d) for the present year. Changed application of Division 40 for this Subdivision (2) For the purposes of this Subdivision, section 355 ‑ 310 applies as if the following changes were made: Changes to be made Item For a reference in section 355 ‑ 310 to... substitute a reference to... 1 paragraph 355 ‑ 305(1)(c) paragraph 355 ‑ 520(1)(d) 2 section 355 ‑ 315 section 355 ‑ 525 3 paragraph 355 ‑ 305(1)(b) paragraph 355 ‑ 520(1)(c) 4 * R&D entity * R&D partnership Disregard certain assets held because of CRC contributions (3) This section has effect subject to subsection 355 ‑ 580(4) (CRC contributions).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

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

(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 . (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. Note 1: A deduction under this subsection is not a notional deduction (see subsection 355 ‑ 105(2)). Note 2: A deduction under this subsection will result in a catch up amount for the partner (see section 355 ‑ 467). (3) If 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 event if Division 40 applied as described in paragraph (1)(e), the partner’s proportion of that amount is included in the partner’s assessable income for the event year. Note: Some or all of the amount included in the partner’s assessable income may result in a clawback amount for the partner (see section 355 ‑ 448).

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 13 of 2015, effective Sch 1 (items 1–6, 9): 5 Mar 2015 (s 2(1) item 2) Sch 1 (items 10–14, 17): repealed before commencing (s 2(1) item 3) | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-530 — Implications for partner’s aggregated turnover

For the purposes of section 355 ‑ 100 (tax offsets for R&D), if: (a) an * R&D entity is a partner of an * R&D partnership at some time during an income year; and (b) the partner’s * aggregated turnover for the income year does not include the R&D partnership’s * annual turnover for the income year; the partner’s aggregated turnover for the income year includes the * partner’s proportion of the R&D partnership’s annual turnover for the income year.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 355-535 — Disposal of R&D results for R&D partnerships

In addition to its application apart from this section, section 355 ‑ 410 (disposal of R&D results) also applies to each partner of an * R&D partnership with such changes as are appropriate having regard to: (a) amounts (the results amounts ) of a kind set out in subparagraphs 355 ‑ 410(1)(b)(i) to (v) that the R&D partnership receives or becomes entitled to receive in an income year; and (b) the principle that any amount to be included in the partner’s assessable income for the income year for a results amount should be the partner’s proportion of the amount arising under subsection 355 ‑ 410(2) for the results amount. Note: The ordinary application of section 355 ‑ 410 will apply to any of the partner’s deductions under this Division that do not relate to the R&D partnership.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-540 — Application of recoupment rules

(1) If: (a) an * R&D partnership incurs expenditure (the partnership expenditure ) on * R&D activities; and (b) an * R&D entity (the partner ) is entitled under section 355 ‑ 100 to a * tax offset because it can, under section 355 ‑ 205 or 355 ‑ 480, deduct some or all of that expenditure; and (c) the R&D partnership receives an amount as a * recoupment of any or all of the partnership expenditure; the partner is taken, for the purposes of Subdivisions 20 ‑ A and 355 ‑ G: (d) to have incurred the partner’s proportion of the partnership expenditure when the R&D partnership incurred that expenditure; and (e) to have received the partner’s proportion of the recoupment when the R&D partnership received the recoupment. (2) If: (a) an * R&D entity (the partner ) is entitled under section 355 ‑ 100 to a * tax offset because it can, under section 355 ‑ 520, deduct an amount for an income year for an asset; and (b) the applicable * R&D partnership receives an amount as a * recoupment of any or all of the R&D partnership’s expenditure included in the * cost of the asset for the purposes of the application of Division 40 as described in paragraph 355 ‑ 520(1)(d); the partner is taken, for the purposes of Subdivisions 20 ‑ A and 355 ‑ G: (c) to have incurred the partner’s proportion of that expenditure when the R&D partnership incurred that expenditure; and (d) to have received the partner’s proportion of the recoupment when the R&D partnership received the recoupment.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-545 — Relevance for net income, and losses, of the R&D partnership

For an * R&D entity that is a partner of an * R&D partnership, none of the following: (a) any expenditure the R&D entity is taken to have incurred because of this Subdivision; (b) any amount the R&D entity can deduct under this Subdivision; (c) any * recoupment the R&D entity is taken to have received because of this Subdivision; are to be taken into account in determining the * net income of the R&D partnership, or any * partnership loss of the R&D partnership, for an income year.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-580 — When notional deductions for CRC contributions arise

Monetary contributions are deductible (1) An * R&D entity can deduct for an income year expenditure it incurs during that year to the extent that: (a) the expenditure is in the form of monetary contributions under the * CRC program; and (b) the contributions have been or will be spent under the CRC program on one or more * R&D activities for which the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for an income year. Note 1: The R&D activities will need to be conducted during the income year the R&D entity is registered for those activities (see sections 27A and 27J of the Industry Research and Development Act 1986 ). Note 2: Expenditure incurred in income years starting on or after 1 July 2011 may be deductible for activities registered for income years starting before 1 July 2011 (see section 355 ‑ 200 of the Income Tax (Transitional Provisions) Act 1997 ). (2) Subsection (1) does not apply to expenditure to the extent that it is incurred out of Commonwealth funding. No other deductions arise for monetary contributions etc. (3) Neither: (a) a contribution an * R&D entity can deduct under subsection (1); nor (b) expenditure incurred under the * CRC program, to the extent that the expenditure is incurred out of: (i) a contribution an R&D entity can deduct under subsection (1); or (ii) Commonwealth funding; can be deducted by any R&D entity under any other provision of this Division for any income year. (4) If an asset’s * cost includes expenditure incurred under the * CRC program out of: (a) a contribution an * R&D entity can deduct under subsection (1); or (b) Commonwealth funding; an amount equal to the asset’s decline in value cannot be deducted under this Division by any R&D entity for any income year.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent

s 355-705 — Effect of findings by Industry Innovation and Science Australia

Findings about registration or core technology (1) If: (a) a certificate given to the Commissioner under the Industry Research and Development Act 1986 sets out: (i) a finding under section 27B of that Act about an * R&D entity’s application for registration under section 27A of that Act for an income year; or (ii) a finding under section 27J of that Act about an R&D entity’s registration under section 27A of that Act for an income year; or (iii) a finding under section 28E of that Act about an R&D entity and one or more * R&D activities conducted or to be conducted during one or more income years; and (b) the finding was made within 4 years after the end of the income year or the last of the income years (as appropriate); the finding binds the Commissioner for the purposes of assessments of the R&D entity for the income year or years (as appropriate). Note: Section 28E of the Industry Research and Development Act 1986 deals with findings that technology is core technology for particular R&D activities. Expenditure incurred in acquiring such technology is not deductible under this Division (see subsection 355 ‑ 225(2)). Advance findings about activities yet to be completed (2) If: (a) an activity is being conducted, or is yet to be conducted, in an income year; and (b) an * R&D entity applies in the income year for a finding under section 28A of the Industry Research and Development Act 1986 about the activity; and (c) Industry Innovation and Science Australia makes the finding and gives the Commissioner a certificate under that Act setting out the finding; the finding binds the Commissioner for the purposes of assessments of the R&D entity for the income year and the next 2 income years. Advance findings about completed activities (3) However, if: (a) an activity is completed during an income year; and (b) an * R&D entity applies in the income year for a finding under section 28A of the Industry Research and Development Act 1986 about the activity; and (c) Industry Innovation and Science Australia makes the finding and gives the Commissioner a certificate under that Act setting out the finding; the finding binds the Commissioner for the purposes of assessments of the R&D entity for the income year.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 63 of 2016, effective Sch 1 (item 40): 20 Oct 2016 (s 2(1) item 1) | Amended by No 101 of 2021, effective Sch 1 (item 3): 11 Sept 2021 (s 2(1) item 1)

s 355-710 — Amendment of assessments

Dealing with findings of Industry Innovation and Science Australia (1) If: (a) a certificate given to the Commissioner under the Industry Research and Development Act 1986 sets out: (i) a finding under section 27B of that Act about an * R&D entity’s application for registration under section 27A of that Act for an income year; or (ii) a finding under section 27J of that Act about an R&D entity’s registration under section 27A of that Act for an income year; or (iii) a finding under section 28A or 28C of that Act made on application by an R&D entity during an income year; or (iv) a finding under section 28E of that Act about an R&D entity and one or more R&D activities conducted or to be conducted during one or more income years; and (b) the finding was made within 4 years after the end of the income year or the last of the income years (as appropriate); despite section 170 of the Income Tax Assessment Act 1936 , the Commissioner may amend the R&D entity’s assessment for an income year affected by the finding at any time for the purposes of giving effect to the finding. (2) However, the Commissioner may only do so within 2 years after the Commissioner is given the certificate if giving effect to the finding would increase the R&D entity’s liability. Dealing with key decisions of Industry Innovation and Science Australia and others (3) If: (a) an internal review decision (the key decision ) under subsection 30D(2) of the Industry Research and Development Act 1986 relates to an * R&D entity; or (b) a decision (also the key decision ) under the Administrative Review Tribunal Act 2024 : (i) varies a decision covered by paragraph (a); or (ii) sets aside a decision covered by paragraph (a), whether or not that key decision also includes a decision made in substitution for the decision covered by paragraph (a); or (c) a decision (also the key decision ) of a court is about: (i) a decision under Part III of the Industry Research and Development Act 1986 relating to an R&D entity; or (ii) a decision covered by paragraph (b); despite section 170 of the Income Tax Assessment Act 1936 , the Commissioner may amend the R&D entity’s assessment for an income year affected by the key decision at any time for the purposes of giving effect to that decision. (4) For the purposes of subsection (3), paragraph (3)(b) applies as if a reference to a decision under the Administrative Review Tribunal Act 2024 that varies or sets aside a decision covered by paragraph (3)(a) included a reference to a decision of that kind made under the Administrative Appeals Tribunal Act 1975 .

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 63 of 2016, effective Sch 1 (item 40): 20 Oct 2016 (s 2(1) item 1) | Amended by No 101 of 2021, effective Sch 1 (item 3): 11 Sept 2021 (s 2(1) item 1) | Amended by No 38 of 2024, effective sch 1 (items 31 ‑ 37, 64): 14 Oct 2024 (s 2(1) item 2)

s 355-715 — Implications for other deductions and tax offsets

(1) If an * R&D entity is entitled under section 355 ‑ 100 to a * tax offset for an income year for expenditure it can deduct under section 355 ‑ 205, 355 ‑ 480 or 355 ‑ 580, that expenditure: (a) cannot be taken into account by any entity in working out a deduction under any other Division of this Act for any income year; and (b) cannot be taken into account by any entity in working out a tax offset under any other Division of this Act for any income year. Note: Section 355 ‑ 205 is about R&D expenditure, section 355 ‑ 480 is about earlier year associate R&D expenditure, and section 355 ‑ 580 is about CRC contributions. (2) If an * R&D entity is entitled under section 355 ‑ 100 to a * tax offset for an income year for a deduction under section 355 ‑ 305 or 355 ‑ 520 of an amount equal to the decline in value of an asset, that decline in value: (a) cannot be taken into account by any entity in working out a deduction under any other Division of this Act (other than section 40 ‑ 292 or 40 ‑ 293) for any income year; and (b) cannot be taken into account by any entity in working out a tax offset under any other Division of this Act for any income year; to the extent that the decline in value is attributable to the use of the asset for the purpose of conducting one or more of the * R&D activities to which the deduction relates. Note 1: A deduction may be available under section 40 ‑ 25 to the extent that the asset’s decline in value is attributable to another purpose. If so, that deduction under section 40 ‑ 25 will not take into account the asset’s decline in value to the extent that it is attributable to the R&D activities (see also subsection 40 ‑ 25(2)). Note 2: Section 355 ‑ 305 is about the decline in value of R&D assets and section 355 ‑ 520 is about the decline in value of R&D partnership assets. Note 3: Sections 40 ‑ 292 and 40 ‑ 293 deal with balancing adjustments when deductions have been available for the asset’s decline in value both under this Division and section 40 ‑ 25.

Amendment history: Inserted by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 360-5 — What this Subdivision is about

You may be entitled to a tax offset if you are, or a trust or partnership of which you are a member is, issued with certain kinds of equity interests in a small Australian company with high ‑ growth potential that is engaging in innovative activities. A modified CGT treatment may also apply to those equity interests. Table of sections Operative provisions 360 ‑ 10 Object of this Subdivision 360 ‑ 15 Entitlement to the tax offset 360 ‑ 20 Limited entitlement for certain kinds of investors 360 ‑ 25 Amount of the tax offset—general case 360 ‑ 30 Amount of the tax offset—members of trusts or partnerships 360 ‑ 35 Amount of the tax offset—trustees 360 ‑ 40 Early stage innovation companies 360 ‑ 45 100 point innovation test 360 ‑ 50 Modified CGT treatment 360 ‑ 55 Modified CGT treatment—partnerships 360 ‑ 60 Modified CGT treatment—not affected by certain roll ‑ overs 360 ‑ 65 Separate modified CGT treatment for roll ‑ overs about wholly ‑ owned companies or scrip for scrip roll ‑ overs

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 360-10 — Object of this Subdivision

The object of this Subdivision is to encourage new investment in small Australian innovation companies with high ‑ growth potential by providing qualifying investors with a tax offset and a modified CGT treatment.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 360-15 — Entitlement to the tax offset

General case (1) You are entitled to a * tax offset for an income year if: (a) you are none of the following: (i) a trust or a partnership; (ia) an * ESVCLP; (ii) a * widely held company or a * 100% subsidiary of a widely held company; and (b) at a particular time during the income year, a company issues you with * equity interests that are * shares in the company; and (c) subsection 360 ‑ 40(1) (about early stage innovation companies) applies to the company immediately after that time; and (d) neither you nor the company is an * affiliate of each other at that time; and (e) the issue of those shares is not an * acquisition of * ESS interests under an * employee share scheme; and (f) immediately after the issue of those shares, you do not hold equity interests in the company, or in an entity * connected with the company, that carry the right to: (i) receive more than 30% of any distribution of income by the company or the entity; or (ii) receive more than 30% of any distribution of capital by the company or the entity; or (iii) exercise, or control the exercise of, more than 30% of the total voting power in the company or the entity. Members of trusts or partnerships (2) A * member of a trust or partnership (other than a partnership that is an * ESVCLP) at the end of an income year is entitled to a * tax offset for the income year if: (a) the trust or partnership would be entitled to a tax offset, under this section, for the income year if the trust or partnership were an individual; and (b) the member is not a * widely held company or a * 100% subsidiary of a widely held company. Trustees (3) A trustee of a trust is entitled to a * tax offset for an income year if: (a) the trustee would be entitled to a tax offset, under subsection (1), for the income year if the trustee were an individual; and (b) the trustee is liable to be assessed or has been assessed, and is liable to pay * tax, on a share of, or all or a part of, the trust’s * net income under section 98, 99 or 99A of the Income Tax Assessment Act 1936 for the income year.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 8 of 2020, effective Sch 2 (items 1–17): 1 Apr 2020 (s 2(1) item 3)

s 360-20 — Limited entitlement for certain kinds of investors

(1) You do not satisfy paragraph 360 ‑ 15(1)(b) if: (a) for each offer resulting in * equity interests that are * shares in the company being issued to you during the income year, none of subsections 708(8), (10) or (11) of the Corporations Act 2001 removed the need for a disclosure document; and (b) a total of more than $50,000 was paid for the issue to you of the shares resulting from all of those offers. (2) For the purposes of this section, assume that Chapter 6D of the Corporations Act 2001 applies to those offers.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 360-25 — Amount of the tax offset—general case

(1) If subsection 360 ‑ 15(1) applies, the amount of your * tax offset is 20% of the sum of the following: (a) an amount equal to any money received, or entitled to be received, by the company referred to in paragraph 360 ‑ 15(1)(b) for the issue to you of the * shares as described in that paragraph; (b) an amount equal to the * market value of any * non ‑ cash benefit received, or entitled to be received, by the company referred to in paragraph 360 ‑ 15(1)(b) for the issue to you of the shares as described in that paragraph, as at the time the shares were issued to you. (2) However, reduce this amount to the extent necessary to ensure that the sum of the following does not exceed $200,000: (a) the sum of the * tax offsets under this Subdivision for the income year for which you and your * affiliates (if any) are entitled; (b) the sum of the tax offsets under this Subdivision that you and your affiliates (if any) carry forward to the income year.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 8 of 2020, effective Sch 2 (items 1–17): 1 Apr 2020 (s 2(1) item 3)

s 360-30 — Amount of the tax offset—members of trusts or partnerships

(1) If subsection 360 ‑ 15(2) applies, the amount of the * member’s * tax offset for the income year is as follows: where: determined share of notional tax offset is the percentage determined under subsection (2) for the * member. notional tax offset amount is what would, under section 360 ‑ 25, have been the amount of the trust’s or partnership’s * tax offset (the notional tax offset ) if the trust or partnership had been an individual. (1A) However, reduce the amount worked out under subsection (1) to the extent necessary to ensure that the sum of the following does not exceed $200,000: (a) the sum of the * tax offsets under this Subdivision for the income year for which the member and the member’s * affiliates (if any) are entitled; (b) the sum of the tax offsets under this Subdivision that the member and the member’s affiliates (if any) carry forward to the income year. (2) The trustee or partnership may determine the percentage of the notional tax offset that is the * member’s share of the notional tax offset. (3) If, under the terms and conditions under which the trust or partnership operates, the * member would be entitled to a fixed proportion of any * capital gain from a * disposal: (a) relating to the trust or partnership; and (b) of the * shares that gave rise to the notional tax offset; and (c) happening at the end of the income year to which the notional tax offset relates; the percentage determined under subsection (2) must be equivalent to that fixed proportion, and a determination of any other percentage has no effect. (4) The trustee or partnership must give the * member written notice of the determination. The notice: (a) must enable the member to work out the amount of the member’s * tax offset by including enough information to enable the member to work out the member’s share of the notional tax offset; and (b) must be given to the member within 3 months after the end of the income year, or within such further time as the Commissioner allows. (5) The sum of all the percentages determined under subsection (2) in relation to the * members of the trust or partnership must not exceed 100%.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 8 of 2020, effective Sch 2 (items 1–17): 1 Apr 2020 (s 2(1) item 3)

s 360-35 — Amount of the tax offset—trustees

If subsection 360 ‑ 15(3) applies, the amount of the * tax offset is the difference between: (a) what would, under section 360 ‑ 25, have been the amount of the tax offset to which the trustee would have been entitled if the trustee had been an individual; and (b) if * members of the trust are entitled to tax offsets under subsection 360 ‑ 15(2) arising from the same * shares to which the trustee’s entitlement arises under subsection 360 ‑ 15(3)—the sum of the amounts worked out under section 360 ‑ 30 (disregarding any reductions under subsection 360 ‑ 30(1A)) for those tax offsets.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 8 of 2020, effective Sch 2 (items 1–17): 1 Apr 2020 (s 2(1) item 3)

s 360-40 — Early stage innovation companies

(1) This subsection applies to a company at a particular time (the test time ) in an income year (the current year ) if: (a) the company was: (i) incorporated in Australia within the last 3 income years (the latest being the current year); or (ii) incorporated in Australia within the last 6 income years (the latest being the current year), and across the last 3 of those income years before the current year it and its * 100% subsidiaries (if any) incurred total expenses of $1 million or less; or (iii) registered in the * Australian Business Register within the last 3 income years (the latest being the current year); and (b) the company and its 100% subsidiaries (if any) incurred total expenses of $1 million or less in the income year before the current year; and (c) the company and its 100% subsidiaries (if any) had a total assessable income of $200,000 or less in the income year before the current year; and (d) at the test time, none of the company’s * equity interests are listed for quotation in the official list of any stock exchange in Australia or a foreign country; and (e) at the test time, the company has at least 100 points under section 360 ‑ 45, or: (i) the company is genuinely focussed on developing for commercialisation one or more new, or significantly improved, products, processes, services or marketing or organisational methods; and (ii) the business relating to those products, processes, services or methods has a high growth potential; and (iii) the company can demonstrate that it has the potential to be able to successfully scale that business; and (iv) the company can demonstrate that it has the potential to be able to address a broader than local market, including global markets, through that business; and (v) the company can demonstrate that it has the potential to be able to have competitive advantages for that business; and (f) at the test time, the company is not a foreign company (within the meaning of the Corporations Act 2001 ). Note: For the purposes of paragraph (e), one way a company can demonstrate something is by engaging the services of another entity. (2) For the purposes of paragraph (1)(c), disregard any of the following: (a) an Accelerating Commercialisation Grant under the program administered by the Commonwealth known as the Entrepreneurs’ Programme; (b) an amount required to be included in the company’s assessable income under subsection 355 ‑ 450(1). (3) Subparagraphs (1)(e)(i) to (v) cannot be satisfied for: (a) a product, process, service or method; or (b) an improvement to a product, process, service or method; that is of a kind prescribed by regulations made for the purposes of this subsection. (4) Subsection (1) does not apply to a company if, before the test time, the company engaged in an activity of a kind prescribed by regulations made for the purposes of this subsection.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7) | Amended by No 8 of 2020, effective Sch 2 (items 1–17): 1 Apr 2020 (s 2(1) item 3) | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 360-45 — 100 point innovation test

(1) At a particular time (the test time ) in an income year (the current year ), a company has the points mentioned in an item of the following table if that item applies to the company at that time. Innovation points potentially available at that time in the current year Column 1 Column 2 Item Points Innovation criteria 1 75 At least 50% of the company’s total expenses for the previous income year is expenditure that the company can notionally deduct for that income year under section 355 ‑ 205 (about R&D expenditure). 2 75 The company has received an Accelerating Commercialisation Grant under the program administered by the Commonwealth known as the Entrepreneurs’ Programme. 3 50 At least 15%, but less than 50%, of the company’s total expenses for the previous income year is expenditure that the company can notionally deduct for that income year under section 355 ‑ 205 (about R&D expenditure). 4 50 (a) the company has completed or is undertaking an accelerator program that: (i) provides time ‑ limited support for entrepreneurs with start ‑ up businesses; and (ii) is provided to entrepreneurs that are selected in an open, independent and competitive manner; and (b) the entity providing that program has been providing that, or other accelerator programs for entrepreneurs, for at least 6 months; and (c) such programs have been completed by at least one cohort of entrepreneurs. 5 50 (a) a total of at least $50,000 has been paid for * equity interests that are * shares in the company; and (b) the company issued those shares to one or more entities that: (i) were not * associates of the company immediately before the issue of those shares; and (ii) did not * acquire those shares primarily to assist another entity become entitled to a * tax offset (or a modified CGT treatment) under this Subdivision; and (c) the company issued those shares at least one day before the test time. 6 50 (a) the company has rights (including equitable rights) under a * Commonwealth law as: (i) the patentee, or a licensee, of a standard patent; or (ii) the owner, or a licensee, of a plant breeder’s right; granted in Australia within the last 5 years (ending at the test time); or (b) the company has equivalent rights under a * foreign law. 7 25 Unless item 6 applies to the company at the test time: (a) the company has rights (including equitable rights) under a * Commonwealth law as: (i) the patentee, or a licensee, of an innovation patent granted and certified in Australia; or (ii) the owner, or a licensee, of a registered design registered in Australia; within the last 5 years (ending at the test time); or (b) the company has equivalent rights under a * foreign law. 8 25 The company has a written agreement with: (a) an institution or body listed in Schedule 1 to the Higher Education Funding Act 1988 (about institutions or bodies eligible for special research assistance); or (b) an entity registered under section 29A of the Industry Research and Development Act 1986 (about research service providers); to co ‑ develop and commercialise a new, or significantly improved, product, process, service or marketing or organisational method. (2) At the test time, the company also has the points prescribed by regulations made for the purposes of this subsection if the prescribed innovation criteria for those points apply to the company at that time.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 360-50 — Modified CGT treatment

(1) This section applies if the issuing of a * share to an entity gives rise to an entitlement to a * tax offset under this Subdivision. Note: This section applies to any share that gives rise to the entitlement, regardless of whether subsection 360 ‑ 25(2) reduces the amount of the tax offset. (2) The entity is taken to hold the * share on capital account. (3) The entity must disregard any * capital loss it makes from any * CGT event happening in relation to the * share if: (a) the entity has continuously held the share since its issue; and (b) the CGT event happens before the tenth anniversary of the issue of the share. (4) The entity may disregard any * capital gain it makes from any * CGT event happening in relation to the * share if: (a) the entity has continuously held the share since its issue; and (b) the CGT event happens on or after the first anniversary, but before the tenth anniversary, of the issue of the share. (5) If the entity has continuously held the * share since its issue, the * first element of its * cost base and * reduced cost base becomes, on the tenth anniversary of its issue, its * market value on that anniversary.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 360-55 — Modified CGT treatment—partnerships

(1) The purpose of this section is to ensure that the modifications made by section 360 ‑ 50 apply to each partner in a partnership in a case where the partnership is the entity that is issued with the * share mentioned in subsection 360 ‑ 50(1). (2) In such a case, subsections 360 ‑ 50(2) to (4) apply as if: (a) the first reference in those subsections to the entity were a reference to each partner in the partnership; and (b) the first reference in those subsections to the * share were a reference to the partner’s interest in the share. Note: The references to the entity and the share in the paragraphs of subsections 360 ‑ 50(3) and (4) continue to apply unchanged. (3) In such a case, treat subsection 360 ‑ 50(5) as if it read as follows: “If the partnership has continuously held the * share since its issue, on the tenth anniversary of its issue: (a) the * first element of the * cost base for a partner’s interest in the share becomes so much of the share’s * market value on that anniversary as is calculated by reference to the partnership agreement, or partnership law if there is no agreement; and (b) the * first element of the * reduced cost base is worked out similarly.”.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 360-60 — Modified CGT treatment—not affected by certain roll ‑ overs

(1) The purpose of this section is to ensure that the modifications made by section 360 ‑ 50 are not affected merely because of one or more * same ‑ asset roll ‑ overs or * replacement ‑ asset roll ‑ overs (other than roll ‑ overs under Division 122 or Subdivision 124 ‑ M). (2) If, apart from those roll ‑ overs, the entity (the original entity ) mentioned in subsection 360 ‑ 50(1) would continue to hold the * share (the original share ) mentioned in that subsection, then subsections 360 ‑ 50(2) to (5) apply as if: (a) the following asset were the original share: (i) if the last roll ‑ over is a * same ‑ asset roll ‑ over—the asset for the roll ‑ over; (ii) if the last roll ‑ over is a * replacement ‑ asset roll ‑ over—the replacement asset for the roll ‑ over; and Note: The asset for subparagraph (i) will be the original share unless a replacement ‑ asset roll ‑ over happened beforehand. (b) that asset was issued when the original share was issued; and (c) the entity that * acquired that asset for the roll ‑ over had continuously held that asset since the original share was issued; and (d) that entity were the original entity; and (e) in a case where that entity is a partnership—paragraphs (a) to (d) modify subsections 360 ‑ 50(2) to (5) as they apply with the modifications in section 360 ‑ 55; and (f) in a case where that entity is not a partnership but the entity that owned the original asset for the roll ‑ over is—paragraphs (a) to (d) modify subsections 360 ‑ 50(2) to (5) as they apply without the modifications in section 360 ‑ 55. Note: A roll ‑ over under Division 122 (about wholly ‑ owned companies) or Subdivision 124 ‑ M (about scrip for scrip roll ‑ overs) will stop the modified CGT treatment under section 360 ‑ 50 from continuing to apply.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 360-65 — Separate modified CGT treatment for roll ‑ overs about wholly ‑ owned companies or scrip for scrip roll ‑ overs

(1) If: (a) a * share mentioned in subsection 360 ‑ 50(1) has been continuously held by the entity mentioned in that subsection; and (b) then: (i) the share, or interests in the share, are * disposed of in a way that gives rise to a trigger event (see section 122 ‑ 15 or 122 ‑ 125) for a roll ‑ over under Division 122; or (ii) the share becomes the original interest (see paragraph 124 ‑ 780(1)(a)) for a roll ‑ over under Subdivision 124 ‑ M; and (c) the roll ‑ over happens on or after the first anniversary, but before the tenth anniversary, of the issue of the share; the * first element of the * cost base and * reduced cost base of the share just before the roll ‑ over is taken to be its * market value at that time. Note: This subsection is a separate modified CGT treatment, and not a continuation of the modifications made by section 360 ‑ 50. (2) If: (a) an asset mentioned in paragraph 360 ‑ 60(2)(a) for a roll ‑ over has been continuously held by the entity that * acquired that asset for that roll ‑ over; and (b) then: (i) that asset, or interests in that asset, are * disposed of in a way that gives rise to a trigger event (see section 122 ‑ 15 or 122 ‑ 125) for a roll ‑ over under Division 122; or (ii) that asset becomes the original interest (see paragraph 124 ‑ 780(1)(a)) for a roll ‑ over under Subdivision 124 ‑ M; and (c) the later roll ‑ over happens on or after the first anniversary, but before the tenth anniversary, of the issue of the original share (see subsection 360 ‑ 60(2) for the earlier roll ‑ over; the * first element of the * cost base and * reduced cost base of that asset just before the later roll ‑ over is taken to be its * market value at that time. Note: This subsection is a separate modified CGT treatment, and not a continuation of the modifications made by section 360 ‑ 50.

Amendment history: Inserted by No 54 of 2016, effective Sch 1 (items 1, 12–14, 19) and Sch 2 (items 1–5, 8–14, 20–34, 44–51, 53–56, 63–74, 76): 1 July 2016 (s 2(1) items 2–5, 7)

s 376-1 — What this Division is about

Companies may be entitled to 1 of 3 refundable tax offsets in relation to Australian expenditure incurred in making films. The offsets are designed to support and develop the Australian screen industry by providing concessional tax treatment for Australian expenditure. Table of sections 376 ‑ 2 Key features of the tax offsets for Australian production expenditure on films 376 ‑ 5 Structure of this Division

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-2 — Key features of the tax offsets for Australian production expenditure on films

(1) The 3 tax offsets are: (a) a refundable tax offset for Australian expenditure in making an Australian film (the producer offset); and (b) a refundable tax offset for Australian expenditure in making any film (the location offset); and (c) a refundable tax offset for Australian expenditure on post, digital and visual effects production for any film (the PDV offset). (2) A company is only entitled to one of these offsets in relation to a film. (3) The amount of the offset is determined as a percentage of certain Australian expenditure incurred by a company in producing the film: (a) the amount of the producer offset is: (i) if the film is a feature film that was produced for commercial exhibition to the public in cinemas—40% of the company’s qualifying Australian production expenditure on the film; and (ii) otherwise—30% of the company’s qualifying Australian production expenditure on the film; and (b) the amount of the location offset is 30% of the company’s qualifying Australian production expenditure on the film; and (c) the amount of the PDV offset is 30% of the company’s qualifying Australian production expenditure on the film that relates to post, digital and visual effects production for the film. (4) One of the requirements for entitlement to these offsets is that a company must be issued with a certificate for the film. The certificate will state the amount of Australian expenditure on which the offset will be determined. (5) The offset is claimed by a company in its income tax return.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 127 of 2021, effective Sch 1 and Sch 3 (items 42, 49–63, 65–69, 71, 72): 1 Jan 2022 (s 2(1) items 2, 5) Sch 2 (item 56) and Sch 3 (items 3–5, 33–35): 8 Dec 2021 (s 2(1) items 3, 4) | Amended by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-5 — Structure of this Division

(1) Subdivision 376 ‑ B tells you about the different tax offsets available for films, who can get each offset and what conditions must be met to get each offset. It also tells you how to work out the amount of each offset. (2) Subdivision 376 ‑ C explains what is meant by: (a) production expenditure on a film; and (b) qualifying Australian production expenditure on a film. It also contains some rules for quantifying expenditure. (3) Subdivision 376 ‑ D deals with a number of administrative matters: (a) applying for a certificate for a film; and (b) the issue and revocation of a certificate for a film; and (c) the making of rules by the Arts Minister (including rules for the establishment of the Film Certification Advisory Board) and the film authority; and (d) review of decisions of the Arts Minister and the film authority; and (e) amendment of assessments following the revocation of a certificate for a film.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9)

s 376-10 — Film production company entitled to refundable tax offset for Australian expenditure in making a film (location offset)

(1) A company is entitled to a * tax offset under this section (the location offset ) for an income year in respect of a * film if: (b) the company’s * qualifying Australian production expenditure on the film ceased being incurred in the income year; and (c) the Arts Minister has issued a certificate to the company for the film under section 376 ‑ 20 (certificate for the location offset); and (d) the company claims the offset in its * income tax return for the income year; and (e) the company: (i) is an Australian resident; or (ii) is a foreign resident but does have a * permanent establishment in Australia and does have an * ABN; when the company lodges the income tax return and when the tax offset is due to be credited to the company. The claim referred to in paragraph (d) is irrevocable. Note: The location offset is a refundable tax offset: see section 67 ‑ 23. (2) The company is not entitled to the location offset if: (a) the company or someone else claims a deduction in relation to a unit of industrial property that relates to copyright in the * film under former Division 10B of Part III of the Income Tax Assessment Act 1936 ; or (b) a final certificate for the film has been issued at any time under former Division 10BA of Part III of the Income Tax Assessment Act 1936 (whether or not the certificate is still in force); or (c) a certificate for the film has been issued at any time under section 376 ‑ 45 (certificate for the PDV offset) (whether or not the certificate is still in force); or (d) a certificate for the film has been issued at any time under section376 ‑ 65 (certificate for the producer offset) (whether or not the certificate is still in force).

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 42 of 2009, effective Schedule 1 (items 17–26), Schedule 2 (items 2–16, 19–39, 41–48), Schedule 4 (items 2–12), Schedule 5 (items 1–12, 15) and Schedule 8 (items 1, 2, 5): Royal Assent Sch 2 (item 1): 21 June 2007 (s 2(1) item 3) Schedule 3: 1 July 2009 Schedule 8 (items 3, 4): 1 July 2011 | Amended by No 88 of 2009, effective s. 4, Schedule 3 (items 1, 5–23), Schedule 4 (items 2–5) and Schedule 5 (items 113–204, 237, 238, 258, 282, 319–341, 344): 18 Sept 2009 Schedule 2 (items 4–15, 25–27, 30, 31): 1 Oct 2009 Schedule 2 (item 23): 1 Jan 2010 | Amended by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent

s 376-15 — Amount of the location offset

The amount of the location offset is 30% of the total of the company’s * qualifying Australian production expenditure on the * film (as determined by the * Arts Minister under section 376 ‑ 30).

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 162 of 2005, effective Schedule 2 (items 1–13), Schedule 3 (items 1–3, 16–19, 33) and Schedule 6 (items 28–32): Royal Assent Schedule 6 (items 1–5, 7–13): 1 July 2005 Sch 6 (items 6, 16–25): 1 July 2001 (s 2(1) items 4, 6) | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-20 — Minister must issue certificate for a film for the location offset

(1) The * Arts Minister must issue a certificate to a company for a * film in relation to the location offset if the Minister is satisfied that the conditions in subsections (2), (3), (5), (7) and (8) are met. Note: The Minister may require the company to provide information to the Minister before issuing the certificate: see section 376 ‑ 32. Type of film (2) The conditions in this subsection are that: (a) the * film was produced for: (i) exhibition to the public in cinemas or by way of television broadcasting (including broadcasting by way of the delivery of a television program by a broadcasting service within the meaning of the Broadcasting Services Act 1992 ); or (ii) distribution to the public as a video recording (whether on video tapes, digital video disks or otherwise); and (b) the film is: (i) a * feature film or a film of a like nature; or (ii) a mini ‑ series of television drama; or (iii) a television series that is not covered by subparagraph (i) or (ii); and (c) the film is not, or is not to a substantial extent: (i) if the film is covered by subparagraph (b)(i) or (ii)—a * documentary; or (ii) a film for exhibition as an advertising program or a commercial; or (iii) a film for exhibition as a discussion program, a quiz program, game show, a panel program, a variety program or a program of a like nature; or (iv) a film of a public event; or (v) if the film is covered by subparagraph (b)(i) or (ii)—a film forming part of a drama program series that is, or is intended to be, of a continuing nature; or (vi) a training film; or (vii) a computer game (within the meaning of the Classification (Publications, Films and Computer Games) Act 1995 ). Television series (3) The conditions in this subsection are that: (a) if the * film is a television series that is not covered by subparagraph (2)(b)(i) or (ii), it is made up of 2 or more episodes that: (i) are produced wholly or principally for exhibition to the public on television under a single title; and (ii) contain a common theme or themes; and (iii) contain dramatic elements that form a narrative structure; and (iv) are produced wholly or principally for exhibition together, for a national market or national markets; and Note: A documentary can be a television series. (b) if the film is a television series that is not covered by subparagraph (2)(b)(i) or (ii): (i) for a television series that is predominantly a digital animation or other animation—the * making of the television series (other than a pilot episode, if any, or activities mentioned in paragraph 376 ‑ 125(3)(a)) takes place within a period of not longer than 36 months; or (ii) otherwise—all principal photography for the television series (other than a pilot episode, if any) takes place within a period of not longer than 12 months; and (c) if the film is a television series that is not covered by subparagraph (2)(b)(i) or (ii)—the amount worked out for the film under subsection (6) is at least $1.5 million. (4) To avoid doubt, and without limiting subparagraph (3)(a)(iii), a * film satisfies the requirement in that subparagraph if: (a) the sole or dominant purpose of the film is to depict actual events, people or situations; and (b) the film depicts those events, people or situations in a dramatic or entertaining way, with a heavy emphasis on dramatic impact or entertainment value. Conditions relating to expenditure thresholds (5) The conditions in this subsection are that: (a) the total of the company’s * qualifying Australian production expenditure on the * film (as determined by the * Arts Minister under section 376 ‑ 30) is at least $20 million; and (c) the company either carried out, or made the arrangements for the carrying out of, all the activities in Australia that were necessary for the making of the film. Note: The operation of paragraph (c) is affected by paragraph 376 ‑ 180(1)(d) (which deals with the situation where one company takes over the making of a film from another company). (6) For the purposes of paragraph (3)(c), the amount for a * film is worked out by using the formula: where: duration of film in hours means the total length of the * film, measured in hours. total QAPE means the total of the company’s * qualifying Australian production expenditure on the * film (as determined by the * Arts Minister under section 376 ‑ 30). Use of resident entities for post, digital and visual effects production (7) The condition in this subsection is that: (a) the company has entered into a contract for the provision of some or all of the * post, digital and visual effects production for the * film with an entity that: (i) is an Australian resident; or (ii) is a foreign resident but does have a * permanent establishment in Australia and does have an * ABN; and (b) all or part of the post, digital and visual effects production (the contracted post, digital and visual effects production ) to which that contract relates has, under the contract, been provided by the entity to the company; and (c) if the entity is a foreign resident—all or part of the contracted post, digital and visual effects production that has been provided by the entity to the company was provided at or through the entity’s permanent establishment in Australia; and (d) all or part of the company’s expenditure on the contracted post, digital and visual effects production is * qualifying Australian production expenditure of the company on the film. Minimum training expenditure requirement (8) The condition in this subsection is that the company: (a) satisfies the minimum training expenditure requirement for the * film under subsection 376 ‑ 27(1); or (b) is exempt from that requirement for the film under: (i) section 376 ‑ 28 (the permanent film infrastructure exemption); or (ii) section 376 ‑ 29 (the training programs exemption).

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11) | Amended by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-25 — Meaning of documentary

Meaning of documentary (1) A * film is a documentary if the film is a creative treatment of actuality, having regard to: (a) the extent and purpose of any contrived situation featured in the film; and (b) the extent to which the film explores an idea or a theme; and (c) the extent to which the film has an overall narrative structure; and (d) any other relevant matters. Exclusion of infotainment or lifestyle programs and magazine programs (2) However, a * film is not a documentary if it is: (a) an infotainment or lifestyle program (within the meaning of Schedule 6 to the Broadcasting Services Act 1992 ); or (b) a film that: (i) presents factual information; and (ii) has 2 or more discrete parts, each dealing with a different subject or a different aspect of the same subject; and (iii) does not contain an over ‑ arching narrative structure or thesis.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Amended by No 162 of 2005, effective Schedule 2 (items 1–13), Schedule 3 (items 1–3, 16–19, 33) and Schedule 6 (items 28–32): Royal Assent Schedule 6 (items 1–5, 7–13): 1 July 2005 Sch 6 (items 6, 16–25): 1 July 2001 (s 2(1) items 4, 6) | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Repealed by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent | Inserted by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 376-27 — Minimum training expenditure requirement

(1) A company satisfies the minimum training expenditure requirement for a * film under this subsection if the company incurs expenditure (the training expenditure ) that satisfies the conditions in subsections (2), (3) and (5). (2) The amount of the training expenditure must be at least the * minimum training expenditure amount for the * film. (3) Each part of the training expenditure must be: (a) expenditure that is both: (i) * qualifying Australian production expenditure of the company on the * film; and (ii) incurred for, or reasonably attributable to, eligible training that is provided to an individual that has worked on, or is working on, the * making of the film; or (b) expenditure that consists of payments made (for any purpose) to an eligible provider (other than an eligible provider that is an * associate of the company): (i) after the production commencement day for the film; and (ii) before either the making of the film ceases or the company’s qualifying Australian production expenditure on the film ceases being incurred (whichever is earlier). (4) To avoid doubt, the expenditure referred to in paragraph (3)(b) need not be * qualifying Australian production expenditure of the company on the * film. (5) The amount of the training expenditure that is * qualifying Australian production expenditure of the company on the * film must be at least 50% of the * minimum training expenditure amount for the film. Meaning of minimum training expenditure amount (6) The minimum training expenditure amount is: (a) for a * film with a production commencement day that is on or after 1 July 2024 but before 1 July 2025—either: (i) unless subparagraph (ii) applies—the lesser of $250,000 and 0.5% of the company’s total QAPE on the film; or (ii) if regulations have been made for the purposes of subsection (7)—the lesser of the prescribed monetary amount and the prescribed percentage of the company’s total QAPE on the film; or (b) for a film with a production commencement day that is on or after 1 July 2025—either: (i) unless subparagraph (ii) applies—the lesser of $500,000 and 1% of the company’s total QAPE on the film; or (ii) if regulations have been made for the purposes of subsection (7)—the lesser of the prescribed monetary amount and the prescribed percentage of the company’s total QAPE on the film. Prescribed amount and prescribed percentage (7) Subject to subsection (8), regulations made for the purposes of this subsection may prescribe: (a) a monetary amount (the prescribed monetary amount ) not exceeding $750,000; and (b) a percentage (the prescribed percentage ) not exceeding 1%. (8) If the regulations prescribe a monetary amount or a percentage, the regulations must prescribe both a monetary amount and a percentage. Definitions (9) In this section: eligible provider means an entity that either: (a) offers * tertiary courses; or (b) is an NVR registered training organisation (within the meaning of the National Vocational Education and Training Regulator Act 2011 ) that offers VET accredited courses (within the meaning of that Act); provided that one or more of those courses include eligible training. eligible training means training or education provided in Australia that contributes to the knowledge, skills or experience of an individual in relation to the * making of * films. prescribed monetary amount : see paragraph (7)(a). prescribed percentage : see paragraph (7)(b). production commencement day , for a * film, means the day that the following commenced: (a) for a film that is predominantly a digital animation or other animation—the * making of the film; (b) otherwise—the principal photography for the film. total QAPE , of a company on a * film, means the total of the company’s * qualifying Australian production expenditure on the film (as determined by the * Arts Minister under section 376 ‑ 30).

Amendment history: Inserted by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-28 — Minimum training expenditure exemption—permanent film infrastructure

(1) A company is exempt under this section from the minimum training expenditure requirement (see subsection 376 ‑ 20(8) and section 376 ‑ 27) for a * film if: (a) the company has materially contributed to the establishment or upgrading of a piece of film infrastructure in Australia (whether or not the establishment or upgrading is complete); and (b) the film infrastructure is or will be, or the upgrades are or will be: (i) permanent; and (ii) reasonable in scale and cost, having regard to the scale and cost of the film; and (iii) reasonably located, having regard to the needs of the Australian screen industry; and (c) the establishment or upgrading of the film infrastructure occurs wholly or partly after the commencement of: (i) for a film that is predominantly a digital animation or other animation—the * making of the film; or (ii) otherwise—the principal photography for the film; and (d) if the establishment or upgrading of the film infrastructure is not complete—the establishment or upgrading will be completed within a reasonable period of time; and (e) the film infrastructure has, or the upgrades have, materially contributed to alleviating capacity constraints in the Australian screen industry. (2) In this section, film infrastructure means buildings or other physical structures that can be used in the * making of * films.

Amendment history: Inserted by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-29 — Minimum training expenditure exemption—training programs

(1) A company is exempt under this section from the minimum training expenditure requirement (see subsection 376 ‑ 20(8) and section 376 ‑ 27) for a * film (the relevant film ) if: (a) an individual (the trainee ) that has worked on the * making of the relevant film has undertaken training under a training program; and (b) all or part of that training was undertaken by the trainee during the period when the trainee worked on the making of the relevant film; and (c) the company or an * associate of the company has incurred expenditure that is for, or that is reasonably attributable to, the training undertaken by the trainee; and (d) the training program has materially contributed to the making of the relevant film; and (e) the training program has materially contributed, or will materially contribute, to the making of at least 2 films, each of which satisfies or will satisfy subsection (2) (and one of which may be the relevant film); and (f) the training program has materially contributed to alleviating capacity constraints in the Australian screen industry. (2) A * film satisfies this subsection if a substantial proportion of the activities involved in the * making of the film take place in Australia. (3) In determining whether a training program has contributed to a thing mentioned in paragraph (1)(f), the matters to which consideration may be given include, but are not limited to, the following: (a) mentoring, industry partnerships and work experience placements facilitated by the training program; (b) skills shortages in the Australian screen industry that are addressed by the training program; (c) activities connected with the training program that contribute to improving health and safety, and diversity and inclusion, in the Australian screen industry; (d) any matters specified in rules made under subsection (4). (4) Subject to subsection (5), the * Arts Minister may, by legislative instrument, make rules specifying matters for the purposes of paragraph (3)(d), including matters of a kind referred to in any of paragraphs (3)(a) to (c). (5) Before making rules under subsection (4), the * Arts Minister must consult the Minister.

Amendment history: Inserted by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-30 — Minister to determine a company’s qualifying Australian production expenditure for the location offset

(1) If a company applies to the * Arts Minister for the issue of a certificate to the company for a * film under section 376 ‑ 20 (certificate for the location offset), the Arts Minister must, as soon as practicable after receiving the application, determine in writing the total of the company’s * qualifying Australian production expenditure on the film for the purposes of the location offset. (2) In making a determination under subsection (1), the * Arts Minister must have regard to the matters in Subdivision 376 ‑ C. (3) The * Arts Minister must give the company written notice of the determination. (4) A determination made under subsection (1) is not a legislative instrument.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9)

s 376-32 — Minister may require information

(1) Either: (a) before determining a company’s * qualifying Australian production expenditure on a * film under subsection 376 ‑ 30(1) for the purposes of the location offset; or (b) before issuing a certificate to the company for the film under section 376 ‑ 20 (certificate for the location offset); the * Arts Minister may, by written notice given to the company, require that the company provide to the Arts Minister information specified in the notice. (2) The information specified in the notice must be information that the * Arts Minister considers relevant to: (a) determining the company’s * qualifying Australian production expenditure or issuing the certificate to the company; or (b) assessing the benefit of the film to the Australian screen industry. (3) The notice must specify the time by which the information is to be provided (which must be at least 30 business days after the notice is given). (4) The * Arts Minister may, on request by the company, extend the time by written notice given to the company. (5) If the information is not provided by the specified time (including any extensions), the * Arts Minister may refuse to determine the company’s * qualifying Australian production expenditure or issue the certificate to the company.

Amendment history: Inserted by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-35 — Film production company entitled to refundable tax offset for post, digital and visual effects production for a film (PDV offset)

(1) A company is entitled to a * tax offset under this section (the PDV offset ) for an income year in respect of a * film if: (a) the company’s * qualifying Australian production expenditure on the film, to the extent that it relates to * post, digital and visual effects production for the film, ceased being incurred in the income year; and (b) the * Arts Minister has issued a certificate to the company for the post, digital and visual effects production for the film under section 376 ‑ 45 (certificate for the PDV offset); and (c) the company claims the offset in its * income tax return for the income year; and (d) the company: (i) is an Australian resident; or (ii) is a foreign resident but does have a * permanent establishment in Australia and does have an * ABN; when the company lodges the income tax return and when the tax offset is due to be credited to the company. The claim referred to in paragraph (c) is irrevocable. Note: The PDV offset is a refundable tax offset: see section 67 ‑ 23. (2) Post, digital and visual effects production for a * film means: (a) the creation of audio or visual elements (other than principal photography, pick ups or the creation of physical elements such as sets, props or costumes) for the film; and (b) the manipulation of audio or visual elements (other than pick ups or physical elements such as sets, props or costumes) for the film; and (c) activities that are necessarily related to the activities mentioned in paragraph (a) or (b). Note: 3D animation, digital compositing and music composition and recording are examples of post, digital and visual effects production. (3) The company is not entitled to the PDV offset if: (a) the company or someone else claims a deduction in relation to a unit of industrial property that relates to copyright in the * film under former Division 10B of Part III of the Income Tax Assessment Act 1936 ; or (b) a final certificate for the film has been issued at any time under former Division 10BA of Part III of the Income Tax Assessment Act 1936 (whether or not the certificate is still in force); or (c) a certificate for the film has been issued at any time under section 376 ‑ 20 (certificate for the location offset) (whether or not the certificate is still in force); or (d) a certificate for the film has been issued at any time under section 376 ‑ 65 (certificate for the producer offset) (whether or not the certificate is still in force).

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Amended by No 162 of 2005, effective Schedule 2 (items 1–13), Schedule 3 (items 1–3, 16–19, 33) and Schedule 6 (items 28–32): Royal Assent Schedule 6 (items 1–5, 7–13): 1 July 2005 Sch 6 (items 6, 16–25): 1 July 2001 (s 2(1) items 4, 6) | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 42 of 2009, effective Schedule 1 (items 17–26), Schedule 2 (items 2–16, 19–39, 41–48), Schedule 4 (items 2–12), Schedule 5 (items 1–12, 15) and Schedule 8 (items 1, 2, 5): Royal Assent Sch 2 (item 1): 21 June 2007 (s 2(1) item 3) Schedule 3: 1 July 2009 Schedule 8 (items 3, 4): 1 July 2011

s 376-40 — Amount of the PDV offset

The amount of the PDV offset is 30% of the total of the company’s * qualifying Australian production expenditure (as determined by the * Arts Minister under section 376 ‑ 50) on a * film, to the extent that it relates to * post, digital and visual effects production for the film.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012

s 376-45 — Minister must issue certificate for a film for the PDV offset

(1) The * Arts Minister must issue a certificate to a company for the * post, digital and visual effects production for a * film in relation to the PDV offset if the Minister is satisfied that the conditions in subsections (2), (3) and (5) are met. Type of film (2) The conditions in this subsection are that: (a) the * film was produced for: (i) exhibition to the public in cinemas or by way of television broadcasting (including broadcasting by way of the delivery of a television program by a broadcasting service within the meaning of the Broadcasting Services Act 1992 ); or (ii) distribution to the public as a video recording (whether on video tapes, digital video disks or otherwise); and (b) the film is: (i) a * feature film or a film of a like nature; or (ii) a mini ‑ series of television drama; or (iii) a television series that is not covered by subparagraph (i) or (ii); and (c) the film is not, or is not to a substantial extent: (i) if the film is covered by subparagraph (b)(i) or (ii)—a * documentary; or (ii) a film for exhibition as an advertising program or a commercial; or (iii) a film for exhibition as a discussion program, a quiz program, game show, a panel program, a variety program or a program of a like nature; or (iv) a film of a public event; or (v) if the film is covered by subparagraph (b)(i) or (ii)—a film forming part of a drama program series that is, or is intended to be, of a continuing nature; or (vi) a training film; or (vii) a computer game (within the meaning of the Classification (Publications, Films and Computer Games) Act 1995 ). Television series (3) The condition in this subsection is that, if the * film is a television series that is not covered by subparagraph (2)(b)(i) or (ii), it is made up of 2 or more episodes that: (a) are produced wholly or principally for exhibition to the public on television under a single title; and (b) contain a common theme or themes; and (c) contain dramatic elements that form a narrative structure; and (d) are produced wholly or principally for exhibition together, for a national market or national markets. Note: A documentary can be a television series. (4) To avoid doubt, and without limiting paragraph (3)(c), a * film satisfies the requirement in that paragraph if: (a) the sole or dominant purpose of the film is to depict actual events, people or situations; and (b) the film depicts those events, people or situations in a dramatic or entertaining way, with a heavy emphasis on dramatic impact or entertainment value. Conditions relating to expenditure thresholds (5) The conditions of this subsection are that: (a) the total of the company’s * qualifying Australian production expenditure on the * film (as determined by the * Arts Minister under section 376 ‑ 50), to the extent that it relates to * post, digital and visual effects production for the film, is at least $500,000; and (b) the company either carried out, or made the arrangements for the carrying out of, all the activities in Australia that were necessary for the post, digital and visual effects production for the film. Note: The operation of paragraph (b) is affected by paragraph 376 ‑ 180(1)(d) (which deals with the situation where one company takes over the making of a film from another company).

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 376-50 — Minister to determine a company’s qualifying Australian production expenditure for the PDV offset

(1) If a company applies to the * Arts Minister for the issue of a certificate to the company for the * post, digital and visual effects production for a * film under section 376 ‑ 45 (certificate for the PDV offset), the Arts Minister must, as soon as practicable after receiving the application, determine in writing the total of the company’s * qualifying Australian production expenditure, to the extent that it relates to post, digital and visual effects production for the film, for the purposes of the PDV offset. (2) In making a determination under subsection (1), the * Arts Minister must have regard to the matters in Subdivision 376 ‑ C. (3) The * Arts Minister must give the company written notice of the determination. (4) A determination made under subsection (1) is not a legislative instrument.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9)

s 376-55 — Film production company entitled to refundable tax offset for Australian expenditure in making an Australian film (producer offset)

(1) A company is entitled to a * tax offset under this section (the producer offset ) for an income year in respect of a * film if: (a) the film was * completed in the income year; and (b) the * film authority has issued a certificate to the company under section 376 ‑ 65 (certificate for the producer offset) for the film; and (c) the company claims the offset in its * income tax return for the income year; and (d) the company: (i) is an Australian resident; or (ii) is a foreign resident but does have a * permanent establishment in Australia and does have an * ABN; when the company lodges the income tax return and when the tax offset is due to be credited to the company. The claim referred to in paragraph (c) is irrevocable. Note: The producer offset is a refundable tax offset: see section 67 ‑ 23. (2) A * film is completed : (a) for a film that is not covered by paragraph (b) or (c)—when it is first in a state where it could reasonably be regarded as ready to be distributed, broadcast or exhibited to the general public; or (b) for a series other than a drama series—at the earlier of: (i) the time when the episode in which the 65th commercial hour is reached is first in a state where it could reasonably be regarded as ready to be distributed, broadcast or exhibited to the general public; and (ii) the time when the series is first in such a state; and (c) for a season of a series other than a drama series—at the earlier of: (i) the time when the episode in which the 65th commercial hour is reached is first in a state where it could reasonably be regarded as ready to be distributed, broadcast or exhibited to the general public; and (ii) the time when the season is first in such a state. (3) Film authority means Screen Australia. (4) The company is not entitled to the producer offset if: (a) the company or someone else claims a deduction in relation to a unit of industrial property that relates to copyright in the * film under former Division 10B of Part III of the Income Tax Assessment Act 1936 ; or (b) a final certificate for the film has been issued at any time under former Division 10BA of Part III of the Income Tax Assessment Act 1936 (whether or not the certificate is still in force); or (c) a certificate for the film has been issued at any time under section 376 ‑ 20 (certificate for the location offset) (whether or not the certificate is still in force); or (d) a certificate for the film has been issued at any time under section 376 ‑ 45 (certificate for the PDV offset) (whether or not the certificate is still in force); or (f) production assistance (other than * development assistance) for the film has been received by the company or anyone else before 1 July 2007 from any of the following bodies: (i) the Film Finance Corporation Australia Limited; (ii) Film Australia Limited; (iii) the Australian Film Commission; (iv) the Australian Film, Television and Radio School; or (g) the * film authority’s Producer Equity Program has provided financial assistance to the company or anyone else for the making of the film. (5) Development assistance for a * film means financial assistance provided to assist with meeting the development costs for the film, and includes assistance to the extent to which it is provided in relation to any of the following: (a) location surveys and other activities undertaken to assess locations for possible use in the film; (b) storyboarding for the film; (c) scriptwriting for the film; (d) research for the film; (e) casting actors for the film; (f) developing a budget for the film; (g) developing a shooting schedule for the film.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 13 of 2008, effective Sch 1 (items 3, 4): 1 July 2008 (s 2(1) item 2) | Amended by No 42 of 2009, effective Schedule 1 (items 17–26), Schedule 2 (items 2–16, 19–39, 41–48), Schedule 4 (items 2–12), Schedule 5 (items 1–12, 15) and Schedule 8 (items 1, 2, 5): Royal Assent Sch 2 (item 1): 21 June 2007 (s 2(1) item 3) Schedule 3: 1 July 2009 Schedule 8 (items 3, 4): 1 July 2011 | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 136 of 2012, effective Sch 7 (items 7–9): 22 Sept 2012 (s 2(1) item 37) | Amended by No 127 of 2021, effective Sch 1 and Sch 3 (items 42, 49–63, 65–69, 71, 72): 1 Jan 2022 (s 2(1) items 2, 5) Sch 2 (item 56) and Sch 3 (items 3–5, 33–35): 8 Dec 2021 (s 2(1) items 3, 4)

s 376-60 — Amount of the producer offset

The amount of the producer offset is: (a) if the * film is a * feature film that was produced for commercial exhibition to the public in cinemas—40%; or (b) otherwise—30%; of the total of the company’s * qualifying Australian production expenditure on the film (as determined by the * film authority under section 376 ‑ 75).

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed by No 133 of 2003, effective 17 Dec 2003 | Inserted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 127 of 2021, effective Sch 1 and Sch 3 (items 42, 49–63, 65–69, 71, 72): 1 Jan 2022 (s 2(1) items 2, 5) Sch 2 (item 56) and Sch 3 (items 3–5, 33–35): 8 Dec 2021 (s 2(1) items 3, 4)

s 376-65 — Film authority must issue certificate for an Australian film for the producer offset

(1) The * film authority must issue a certificate to a company for a * film in relation to the producer offset if the film authority is satisfied that: (a) the company either carried out, or made the arrangements for the carrying out of, all the activities that were necessary for the * making of the film; and (b) the conditions in subsections (2) to (6) are met. Note: The operation of paragraph (a) is affected by paragraph 376 ‑ 180(1)(d) (which deals with the situation where one company takes over the making of a film from another company). Type of film (2) The conditions in this subsection are that: (a) the * film: (i) has a significant Australian content (see section 376 ‑ 70); or (ii) has been made under an * arrangement entered into between the Commonwealth or an authority of the Commonwealth and a foreign country or an authority of the foreign country; and (b) the film was produced for: (i) exhibition to the public in cinemas or by way of television broadcasting (including broadcasting by way of the delivery of a television program by a broadcasting service within the meaning of the Broadcasting Services Act 1992 ); or (ii) distribution to the public as a video recording (whether on video tapes, digital video disks or otherwise); and (c) the film is: (i) a * feature film; or (ii) a single episode program; or (iii) a series; or (iv) a season of a series; or (v) a short form animated film that is not covered by subparagraph (i), (ii), (iii) or (iv); and (d) the film is not, or is not to a substantial extent: (i) a film for exhibition as an advertising program or a commercial; or (ii) a film for exhibition as a discussion program, a quiz program, game show, a panel program, a variety program or a program of a like nature; or (iii) a film of a public event (other than a * documentary); or (iv) a training film; or (v) a computer game (within the meaning of the Classification (Publications, Films and Computer Games) Act 1995 ); or (vi) a news or current affairs program; or (vii) a reality program (other than a documentary). Single episode programs (3) The conditions in this subsection are that, if the * film is a single episode program, it: (a) is of a like nature to a * feature film; and (b) is produced for: (i) exhibition to the public by way of television broadcasting (including broadcasting by way of the delivery of a television program by a broadcasting service within the meaning of the Broadcasting Services Act 1992 ); or (ii) distribution to the public as a video recording (whether on video tapes, digital video disks or otherwise); and (c) if the program is a * documentary—is of at least one half of a commercial hour in duration; and (d) if the program is not a documentary—is of at least one commercial hour in duration. Short form animated film (4) The conditions in this subsection are that, if the * film is a short form animated film, it: (a) is a program comprising one or more episodes which are produced wholly or principally for exhibition together, for a national market or national markets under a single title; and (b) is predominantly made using cell, stop motion, digital or other animation; and (c) contains a common theme or themes; and (d) is of at least one quarter of a commercial hour in duration. Series and seasons of series (5) The conditions in this subsection are that: (a) if the application for the certificate is for a * film that is a series and not for a film that is a season of that series: (i) the series is made up of at least 2 episodes; and (ii) each episode of the series is at least one half of a commercial hour in duration, except where the film is predominantly made using cell, stop motion, digital or other animation, in which case each episode is at least one quarter of a commercial hour in duration; and (iii) in the case of a series other than a drama series—the series has a new creative concept (see section 376 ‑ 70); and (b) if the application for the certificate is for a film that is a season of a series: (i) the season is made up of at least 2 episodes; and (ii) each episode of the series is at least one half of a commercial hour in duration, except where the film is predominantly made using cell, stop motion, digital or other animation, in which case each episode is at least one quarter of a commercial hour in duration; and (iii) in the case of a series other than a drama series—the series has a new creative concept (see section 376 ‑ 70). Expenditure thresholds (6) Subject to subsection (6A), the conditions in this subsection are as set out in the table. Expenditure thresholds Item For this type of film ... The total of the company’s qualifying Australian production expenditure on the film (as determined by the film authority under section 376 ‑ 75) is at least ... and the amount for the film worked out under subsection (7) is at least ... 1 A * feature film $500,000 not applicable 2 A single episode program other than a * documentary $500,000 not applicable 3 A single episode program that is a * documentary $500,000 $250,000 4 A short form animated film that is not a * feature film, a single episode program, a series or a season of a series $250,000 $1,000,000 5 A * film where the application for the certificate is for a series and not for a season of that series, and the series is not a * documentary $1 million $500,000 6 A * film where the application for the certificate is for a series and not for a season of that series, and the series is a * documentary $500,000 $250,000 7 A * film where the application for the certificate is for a season of a series, and the series is not a * documentary $1 million $500,000 7A A * film where: (a) the application for the certificate is for a season of a series; and (b) the series is a drama series; and (c) the series is not a * documentary; and (d) the season meets the conditions in subsection (6B) $35 million not applicable 8 A * film where the application for the certificate is for a season of a series, and the series is a * documentary $500,000 $250,000 (6A) A * film that is both of the type referred to in item 7, and of the type referred to in item 7A, of the table in subsection (6) meets the conditions in that subsection if the film meets the conditions set out in one or both of those items. (6B) The conditions in this subsection are that: (a) the season is made up of 2 or more episodes that are produced wholly or principally for exhibition together under a single title; and (b) the season is produced for: (i) exhibition to the public by way of television broadcasting (including broadcasting by way of the delivery of a television program by a broadcasting service within the meaning of the Broadcasting Services Act 1992 ); or (ii) distribution to the public as a video recording (whether on video tapes, digital video disks or otherwise); and (c) either: (i) for a season that is predominantly a digital animation or other animation—the * making of the season (other than a pilot episode, if any) takes place within a period of not longer than 36 months; or (ii) otherwise—all principal photography for the season (other than a pilot episode, if any) takes place within a period of not longer than 12 months. (7) The amount worked out for a * film under this subsection is the amount worked out using the formula: where: duration of film in hours means the total length of the * film, measured in hours. total QAPE means the total of the company’s * qualifying Australian production expenditure on the * film (as determined by the * film authority under section 376 ‑ 75).

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012 | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11) | Amended by No 127 of 2021, effective Sch 1 and Sch 3 (items 42, 49–63, 65–69, 71, 72): 1 Jan 2022 (s 2(1) items 2, 5) Sch 2 (item 56) and Sch 3 (items 3–5, 33–35): 8 Dec 2021 (s 2(1) items 3, 4) | Amended by No 67 of 2024, effective sch 1 (items 4 ‑ 7), sch 3 (items 1 ‑ 7), sch 5 (items 49 ‑ 52), sch 6: 1 Oct 2024 (s 2(1) items 3, 7, 10, 12)

s 376-70 — Determination of content of film

(1) In determining for the purposes of section 376 ‑ 65 (certificate for the producer offset) whether a * film has a significant Australian content, the * film authority must have regard to the following: (a) the subject matter of the film; (b) the place where the film was made; (c) the nationalities and places of residence of the persons who took part in the * making of the film; (d) the details of the * production expenditure incurred in respect of the film; (e) any other matters that the film authority considers to be relevant. (2) In determining for the purposes of section 376 ‑ 65 (certificate for the producer offset) whether a * film that is a series has a new creative concept, the * film authority must have regard to the following: (a) the title of the series; (b) whether the series has substantially different characters, settings, production locations and individuals involved in the * making of the series than any other series; (c) any other matters that the film authority considers to be relevant.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9)

s 376-75 — Film authority to determine a company’s qualifying Australian production expenditure for the producer offset

(1) If a company applies to the * film authority for the issue of a certificate to the company for a * film under section 376 ‑ 65 (certificate for the producer offset), the film authority must, as soon as practicable after receiving the application, determine in writing the total of the company’s * qualifying Australian production expenditure on the film for the purposes of the producer offset. (2) In making a determination under subsection (1), the * film authority must have regard to the matters in Subdivision 376 ‑ C. (3) The * film authority must give the company written notice of the determination. (4) A determination made under subsection (1) is not a legislative instrument.

Amendment history: Inserted by No 27 of 2002, effective 4 Apr 2002 | Repealed and substituted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9)

s 376-125 — Production expenditure—general test

(1) A company’s production expenditure on a * film is expenditure that the company incurs to the extent to which it: (a) is incurred in, or in relation to, the * making of the film; or (b) is reasonably attributable to: (i) the use of equipment or other facilities for; or (ii) activities undertaken in; the making of the film. (2) The making of a * film means the doing of the things necessary for the production of the first copy of the film. (3) The making of a * film includes: (a) pre ‑ production activities in relation to the film; and (b) post ‑ production activities in relation to the film; and (c) any other activities undertaken to bring the film up to the state where it could reasonably be regarded as ready to be distributed, broadcast or exhibited to the general public. (4) The making of a * film does not include: (a) developing the proposal for the * making of the film; or (b) arranging or obtaining finance for the film; or (c) distributing the film (other than the activities listed in paragraphs (a) to (e) of item 7 of the table in subsection 376 ‑ 170(2)); or (d) promoting the film. (5) Without limiting subsection (1), a company’s production expenditure on a * film: (a) may be expenditure that is incurred in the income year for which the * tax offset is sought or in an earlier income year; and (b) may be expenditure of either a capital or a revenue nature; and (c) may be expenditure that gives rise to a deduction. Paragraph (c) has effect subject to item 10 of the table in section 376 ‑ 135 (which deals with capital allowances). (6) If: (a) a company: (i) * holds a * depreciating asset; and (ii) uses the asset, while held, in the * making of a * film; and (b) deductions in relation to the asset are available under Division 40 (which deals with capital allowances); the production expenditure of the company on the film includes an amount equal to the decline in the value of the asset to the extent to which that decline is reasonably attributable to the use of the asset in the making of the film (the film proportion ). The decline in value of the asset is to be worked out using Division 40. Note: Under item 10 of the table in section 376 ‑ 135, expenditure that sets or increases the cost of the asset does not count as production expenditure. (7) If a * balancing adjustment event occurs for the asset before the film is * completed: (a) if the asset’s * termination value is more than its * adjustable value just before the event occurred—the production expenditure of the company on the film is reduced by the film proportion of the difference; or (b) if the asset’s termination value is less than its adjustable value just before the event occurred—the production expenditure of the company on the film includes the film proportion of the difference.

Amendment history: Inserted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012

s 376-130 — Production expenditure—special qualifying Australian production expenditure

Expenditure of a company is also production expenditure of the company on a * film if it is * qualifying Australian production expenditure of the company on the film under section 376 ‑ 150 or 376 ‑ 165. Note: This means that the special qualifying Australian production expenditure in sections 376 ‑ 150 and 376 ‑ 165 is taken into account both in working out the total amount of the company’s qualifying Australian production expenditure and in working out the total amount of all the company’s production expenditure on the film.

Amendment history: Inserted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent

s 376-135 — Production expenditure—specific exclusions

Despite sections 376 ‑ 125 and 376 ‑ 130, the following expenditure of a company is not production expenditure of the company on a * film, except to the extent, if any, as mentioned in column 3 of the table: Expenditure that does not count as production expenditure on a film Item This kind of expenditure by the company is not production expenditure ... except to the extent to which the expenditure is ... 1 Financing expenditure expenditure incurred by way of, or in relation to, the financing of the * film (including returns payable on amounts invested in the film and expenditure in relation to raising and servicing finance for the film) * qualifying Australian production expenditure under item 6 of the table in subsection 376 ‑ 150(1) and paragraph (a) of item 5 of the table in subsection 376 ‑ 170(2) 2 Development expenditure * development expenditure on the * film * qualifying Australian production expenditure under item 1 of the table in subsection 376 ‑ 150(1) 3 Copyright acquisition expenditure expenditure incurred in acquiring copyright, or a licence in relation to copyright, in a pre ‑ existing work for use in the * film * qualifying Australian production expenditure under item 2 of the table in subsection 376 ‑ 150(1) 4 General business overheads expenditure incurred to meet the general business overheads of the company that: (a) are not incurred in, or in relation to, the * making of the * film; and (b) are not reasonably attributable to: (i) the use of equipment or other facilities for; or (ii) activities undertaken in; the making of the film * qualifying Australian production expenditure under item 1 of the table in subsection 376 ‑ 165(1) or item 1 of the table in subsection 376 ‑ 170(2) 5 Publicity and promotion expenditure expenditure incurred in publicising or otherwise promoting the * film (including press expenses, still photography, videotapes, public relations and other similar expenses) * qualifying Australian production expenditure under item 3 or 4 of the table in subsection 376 ‑ 150(1) or item 6 of the table in subsection 376 ‑ 170(2) 6 Deferments amounts that are payable only out of the receipts, earnings or profits from the * film 7 Profit participation amounts that: (a) depend on the receipts, earnings or profits from the * film; or (b) are otherwise dependent on the commercial performance of the film 8 Residuals amounts payable in satisfaction of the residual rights of a person who is a member of the cast paid out by the company before the * film is * completed 9 Advances amounts paid by way of advance on a payment to which item 6, 7 or 8 applies to the extent to which it may become repayable by the person to whom it is paid 10 Acquisition of depreciating asset expenditure to the extent to which it sets, or increases, the * cost of a * depreciating asset This item has effect subject to subsections 376 ‑ 125(6) and (7). * qualifying Australian production expenditure under item 2 of the table in subsection 376 ‑ 150(1) 11 Regulations expenditure specified in regulations

Amendment history: Inserted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012

s 376-140 — Production expenditure—special rules for the location offset

Despite sections 376 ‑ 125 and 376 ‑ 130, the expenditure of a company is not production expenditure of the company on a * film in relation to the location offset if: (a) the film is a television series that is not a * feature film or a mini ‑ series of television drama; and (b) the expenditure is reasonably attributable to the production of a pilot episode to the television series; and (c) the expenditure, apart from this subsection, would be production expenditure that was not * qualifying Australian production expenditure.

Amendment history: Inserted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 61 of 2011, effective s. 4, Schedule 1, Schedule 2 (items 1–8), Schedule 3, Schedule 4 and Schedule 7: Royal Assent

s 376-145 — Qualifying Australian production expenditure—general test

A company’s qualifying Australian production expenditure on a * film is the company’s * production expenditure on the film to the extent to which it is incurred for, or is reasonably attributable to: (a) goods and services provided in Australia; or (b) the use of land located in Australia; or (c) the use of goods that are located in Australia at the time they are used in the * making of the film.

Amendment history: Inserted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9)

s 376-150 — Qualifying Australian production expenditure—specific inclusions

(1) The following expenditure of a company is also qualifying Australian production expenditure of the company on a * film: Special Australian expenditure Item Type of expenditure 1 Australian development expenditure * development expenditure on the * film to the extent to which it is incurred for, or is reasonably attributable to: (a) goods and services provided in Australia; or (b) the use of land located in Australia; or (c) the use of goods that are located in Australia at the time they are used in the * making of the film [see subsection (2)] 2 Expenditure incurred in acquiring Australian copyright expenditure incurred to acquire copyright, or a licence in relation to copyright, in a pre ‑ existing work for use in the * film if the copyright is held by an individual or a company that is an Australian resident 3 Expenditure incurred in producing Australian copyrighted promotional material expenditure incurred in producing material for use in publicising or otherwise promoting the * film if the copyright in the material is held by an individual or a company that is an Australian resident 4 Expenditure incurred in producing additional content expenditure incurred in producing audio or visual content for the * film otherwise than for use in the first copy of the film, to the extent that the expenditure is incurred in Australia prior to the * completion of the film 5 Regulations expenditure prescribed by the regulations 6 Certain financing expenditure expenditure incurred in Australia prior to the end of the income year in which * completion of the * film occurs in respect of any of the following: (a) insurance related to making the film; (b) fees for audit services and legal services provided in Australia in relation to raising and servicing the financing of the film which are incurred by the company that makes, or is responsible for making, the film; (c) fees for incorporation and liquidation of the company that makes or is responsible for making the film. (2) Legal costs are covered by item 1 of the table in subsection (1) only if they relate to: (a) writers’ contracts; or (b) chain of title and other copyright issues.

Amendment history: Inserted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 147 of 2011, effective s. 4, Schedule 1, Schedule 5 (items 1–9, 16–20), Schedule 6 (items 1, 6) and Schedule 9: Royal Assent Schedule 8 (items 2–9, 37, 38, 41): 1 Jan 2012

s 376-155 — Qualifying Australian production expenditure—specific exclusions

Despite sections 376 ‑ 145, 376 ‑ 150, 376 ‑ 165 and 376 ‑ 170, the following expenditure of a company is not qualifying Australian production expenditure of a company on a * film: (a) expenditure that is incurred when: (i) the company is a foreign resident; and (ii) the company does not have both a * permanent establishment in Australia and an * ABN; (b) expenditure in relation to: (i) remuneration and other benefits provided to an individual for the individual’s services in relation to the * making of the film; or (ii) travel and other costs associated with the services an individual provides in relation to the making of the film; if the individual: (iii) is not a member of the cast; and (iv) enters Australia to work on the film for less than 2 consecutive calendar weeks; (c) expenditure prescribed by the regulations.

Amendment history: Inserted by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9)