Document ID: chunk:federal_register_of_legislation:C2011C00519:clause:11_8:p2
Version: federal_register_of_legislation:C2011C00519
Segment Type: clause
Provision Reference: sch 11 cl 8 (pt 2/3)
Character Range: 282351–285176

(as appropriate) incurred expenditure during the year of income.

Note 1: An example of the carrying on or performance of activities indirectly under an agreement that is a contract is the carrying on or performance of the activities under a subcontract, or one of a chain of subcontracts, under the agreement.

Note 2: One effect of paragraph (14C)(e) is that, even if the eligible company has an agreement with the foreign company for the carrying on of Australian‑centred research and development activities wholly or primarily on behalf of the foreign company, the eligible company cannot deduct its expenditure:

(a) for performing the activities as a subcontractor under a subcontract with another eligible company grouped under section 73L with the eligible company; or

(b) if the eligible company is a subcontractor to another eligible company grouped under section 73L with the eligible company, for further subcontracting the performance of the activities.

Note 3: The eligible company may get an extra deduction under section 73QB if its expenditure on foreign owned R&D for the year of income is greater than the average of the amounts that would be the expenditure on foreign owned R&D by the eligible company for the 3 previous years of income if subsection (2BA) of this section had not been enacted.

 (14D) The expenditure on foreign owned R&D by the eligible company for the year of income is the amount that would be the eligible company's incremental expenditure under section 73P for the year of income if:
 (a) the Australian‑centred research and development activities covered by subsection (14C) (ignoring paragraphs (14C)(f) and (g)) of this section were carried on on behalf of the eligible company (and not on behalf of the foreign company mentioned in paragraph (14C)(c)); and
 (b) the only expenditure incurred by the eligible company in the year of income in relation to research and development activities had been the expenditure covered by subsection (14C) (ignoring paragraphs (14C)(f) and (g)) of this section; and
 (c) the total group markup (if any) of the eligible company for the year of income were the amount (if any) that would be worked out under subsection (14AC) of this section if the company were working out the amount of a deduction under subsection (13) or (14) of this section on the basis described in paragraphs (a) and (b) of this subsection.

Note 1: Paragraphs (14D)(a) and (b) affect what would be the eligible company's incremental expenditure by affecting expenditure described in definitions of terms (e.g. contracted expenditure and salary expenditure) used in the definition of research and development expenditure, on which incremental expenditure is based.

Note 2: Subsection 73P(5) excludes a company's total group markup (worked out under subsection (14AC)