Document ID: chunk:federal_register_of_legislation:C2014C00703:clause:1_2:p5
Version: federal_register_of_legislation:C2014C00703
Segment Type: clause
Provision Reference: sch 1 cl 2 (pt 5/6)
Character Range: 26596–29495

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.

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.

Subdivision 355‑E—Notional deductions for decline in value of depreciating assets used for R&D activities

Table of sections
355‑300 What this Subdivision is about
355‑305 When notional deductions for decline in value arise
355‑310 Notional application of Division 40
355‑315 Balancing adjustments—assets only used for R&D activities

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 notionally deduct a further amount. Alternatively, an amount