Commonwealth: Taxation Laws Amendment (Research and Development) Act 2001 (Cth)

Taxation Laws Amendment (Research and Development) Act 2001 Act No. 170 of 2001 as amended This compilation was prepared on 14 April 2005 [This Act was amended by Act No. 57 of 2002 and Act No. 41 of 2005] Amendment from Act No. 57 of 2002 [Schedule 12 (item 63) amended subsection 2(3) Schedule 12 (item 63) commenced on 1 October 2001] Amendment from Act No. 41 of 2005 [Schedule 10 (item 268) amended Schedule 4 (item 2) Schedule 10 (item 268) commenced on 1 October 2001] Prepared by the Office of Legislative Drafting and Publishing, Attorney‑General's Department, Canberra Contents 1 Short title................................... 2 Commencement............................... 3 Schedule(s).................................. Schedule 1—Streamlining amendments Part 1—Objects provisions Income Tax Assessment Act 1936 Industry Research and Development Act 1986 Part 1A—Report on access to tax offset Industry Research and Development Act 1986 Part 3—Research and development plans Income Tax Assessment Act 1936 Industry Research and Development Act 1986 Schedule 2—Plant etc. Part 1—Retrospective change to qualifying plant expenditure Income Tax Assessment Act 1936 Part 2—Retrospective exemption of pilot plant from CGT provisions Income Tax (Transitional Provisions) Act 1997 Part 3—Effective life basis for deduction Division 1—Amendments commencing at 12 pm on 29 January 2001 Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Industry Research and Development Act 1986 Division 2—Amendments commencing immediately after the New Business Tax System (Capital Allowances) Act 2001 Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Industry Research and Development Act 1986 Schedule 3—Refundable tax offset Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Taxation (Interest on Overpayments and Early Payments) Act 1983 Schedule 4—Incremental tax incentive Income Tax Assessment Act 1936 An Act to amend the law relating to taxation incentives for research and development, and for related purposes [Assented to 1 October 2001] The Parliament of Australia enacts: 1 Short title This Act may be cited as the Taxation Laws Amendment (Research and Development) Act 2001. 2 Commencement (1) Subject to this section, this Act commences on the day on which it receives the Royal Assent. (2) Division 1 of Part 3 of Schedule 2 is taken to have commenced at 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001. (3) Division 2 of Part 3 of Schedule 2 commences, or is taken to have commenced, immediately after the commencement of Schedule 1 to the New Business Tax System (Capital Allowances) Act 2001. 3 Schedule(s) Subject to section 2, each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Streamlining amendments Part 1—Objects provisions Income Tax Assessment Act 1936 1 Before subsection 73B(1AA) Insert: (1AAA) The object of this section is to provide a tax incentive, in the form of a deduction, to make eligible companies more internationally competitive by: (a) encouraging the development by eligible companies of innovative products, processes and services; and (b) increasing investment by eligible companies in defined research and development activities; and (c) promoting the technological advancement of eligible companies through a focus on innovation or high technical risk in defined research and development activities; and (d) encouraging the use by eligible companies of strategic research and development planning; and (e) creating an environment that is conducive to increased commercialisation of new processes and product technologies developed by eligible companies. The benefits of the tax incentive are targeted by being limited to particular expenditure on certain defined activities. Industry Research and Development Act 1986 2 Before section 39A Insert: 39AA Object of Part (1) The object of this Part is to complement the tax incentive provided by sections 73B, 73BA, 73I and 73Y of the Income Tax Assessment Act 1936 by giving the Board the role to determine whether eligible companies satisfy the requirements for the incentive. (2) The object of sections 73B, 73BA, 73I and 73Y of the Income Tax Assessment Act 1936 is to provide a tax incentive, in the form of a deduction, to make eligible companies more internationally competitive by: (a) encouraging the development by eligible companies of innovative products, processes and services; and (b) increasing investment by eligible companies in defined research and development activities; and (c) promoting the technological advancement of eligible companies through a focus on innovation or high technical risk in defined research and development activities; and (d) encouraging the use by eligible companies of strategic research and development planning; and (e) creating an environment that is conducive to increased commercialisation of new processes and product technologies developed by eligible companies. The benefits of the tax incentive are targeted by being limited to particular expenditure on certain defined activities. Part 1A—Report on access to tax offset Industry Research and Development Act 1986 2A After paragraph 46(2)(c) Insert: (ca) must set out: (i) the total number of applications during the financial year for registration of eligible companies under section 39J that specified an intention to choose a tax offset under section 73I of the Income Tax Assessment Act 1936; and (ii) the total amounts of the offsets involved; and must include an analysis of the tax offset scheme, including the tax offset thresholds, for that year; and 2B Application The amendment made by this Part applies to reports in relation to the financial year commencing on 1 July 2001 and all later financial years. Part 3—Research and development plans Income Tax Assessment Act 1936 5 After subsection 73B(2B) Insert: (2BA) Activities are not covered by the definition of research and development activities in subsection (1) unless they are carried on in accordance with a plan that complies with any guidelines formulated by the Board under section 39KA of the Industry Research and Development Act 1986 that are in force at the time. 6 Application The amendment made by item 5 applies to activities that commence to be carried on after 12 am, by legal time in the Australian Capital Territory, at the start of 1 July 2002. Industry Research and Development Act 1986 7 After section 39K Insert: 39KA Guidelines concerning plans for research and development activities (1) The Board must, as soon as practicable (and, in any event, within 90 days) after the commencement of this section, formulate written guidelines setting out the requirements for plans for the purposes of subsection 73B(2BA) of the Income Tax Assessment Act 1936. (1A) In formulating the guidelines, the Board must ensure that, having regard to the size and complexity of the activities that are to be carried out in accordance with the plans, the guidelines will not impose undue burdens on eligible companies that are small. (2) The Board must cause the guidelines to be: (a) published in the Gazette; and (b) made available on request without charge, to any eligible company. (3) The requirements may cover the following matters: (a) who is to make the plans; (b) who is to approve the plans; (c) when the plans are to be made; (d) what the plans are to contain; (e) how the plans can be amended; (f) any other matter. (4) The Board may, at any time, and whether or not within 90 days after the commencement of this section, by writing, repeal, replace or amend guidelines made under subsection (1). (5) An instrument formulating guidelines under subsection (1), or repealing, replacing or amending such guidelines, is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901. Schedule 2—Plant etc. Part 1—Retrospective change to qualifying plant expenditure Income Tax Assessment Act 1936 1 Subsection 73B(1) (at the end of the definition of plant expenditure) Add "at least for an initial period". 2 Application The amendment made by this Part applies to expenditure incurred by an eligible company on: (a) the acquisition, or the construction, under a contract entered into on or after 1 July 1985, of a unit of plant; or (b) the construction by the company, being construction that commenced on or after 1 July 1985, of a unit of plant. Part 2—Retrospective exemption of pilot plant from CGT provisions Income Tax (Transitional Provisions) Act 1997 3 After section 118‑10 Insert: 118‑24A Pilot plant (1) Disregard a *capital gain or *capital loss you make from a *CGT event happening in relation to pilot plant, as defined in subsection 73B(1) of the Income Tax Assessment Act 1936: (a) if the CGT event happens after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (b) if: (i) the CGT event is CGT event A1 (disposal of a CGT asset); and (ii) the time of the event is when you entered into the contract for the disposal of the CGT asset; and (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (2) However, subsection (1) does not apply to assessments for the 2001‑2002 income year and later income years. Part 3—Effective life basis for deduction Division 1—Amendments commencing at 12 pm on 29 January 2001 Income Tax Assessment Act 1936 4 Subsection 73B(1) (at the end of paragraph (b) of the definition of aggregate research and development amount) Add: , where that expenditure was incurred in respect of plant: (i) acquired, or constructed, under a contract entered into at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or (ii) that the company commenced to construct at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001. Note: The heading to section 73B is altered by omitting "Expenditure", and substituting "Certain expenditure". 5 Subsection 73B(1) (at the end of paragraph (ba) of the definition of aggregate research and development amount) Add: , where: (i) the unit or units were acquired, or constructed, under a contract or contracts entered into by the company at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or (ii) the company commenced to construct the unit or units at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001. 6 Subsection 73B(1) (after paragraph (ba) of the definition of aggregate research and development amount) Insert: (bb) the amount of any notional Division 42 deduction (as defined in section 73BJ) taken into account in working out a deduction allowed or allowable to the company under section 73BH in respect of the year of income; and 7 Subsection 73B(1) Insert: excluded plant expenditure means: (a) expenditure incurred by an eligible company in: (i) the acquisition, or the construction, under a contract entered into at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or (ii) the construction by the company, being construction that commenced at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; of a unit of plant or pilot plant; and (b) any other expenditure incurred by an eligible company in the acquisition or construction, or that otherwise forms part of the cost, of a unit of section 73BH plant (as defined by section 73BI). 8 Subsection 73B(1) (definition of research and development expenditure) Omit "or expenditure incurred in the acquisition or construction of plant or pilot plant or", substitute ", excluded plant expenditure or expenditure incurred in the acquisition or construction of". 9 After subsection 73B(15) Insert: (15AAA) Subsection (15) does not apply to a unit of plant: (a) acquired, or constructed, under a contract entered into by the company after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or (b) that the company commenced to construct after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001. 10 After subsection 73B(15AA) Insert: (15AAAA) Subsection (15AA) does not apply to a unit of post‑23 July 1996 pilot plant: (a) acquired, or constructed, under a contract entered into by the company after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or (b) that the company commenced to construct after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001. 11 After section 73B Insert: 73BH Deduction for plant etc. used for purpose of carrying on research and development activities Entitlement to deduction (1) If an eligible company has a notional Division 42 deduction for a unit of section 73BH plant for a year of income, the company is entitled to a deduction under this section for the plant for the year of income. Amount of deduction (2) If the eligible company's aggregate research and development amount for the year of income is more than $20,000, the deduction is equal to the notional Division 42 deduction multiplied by 1.25. If not, it equals the notional Division 42 deduction. No deduction if earlier Division 42 pooling or low‑value pool deductions allowable (3) An eligible company is not entitled to a deduction under this section for a unit of section 73BH plant for any period if the company was entitled to a deduction for the unit for any earlier period under Division 42 of the Income Tax Assessment Act 1997, in a case to which Subdivision 42‑L or 42‑M (about pooling and low‑value pools) of that Division applied. Expenditure deductible under this section not deductible under other provisions (6) If the whole or a part of an amount of expenditure incurred by an eligible company has been allowed or is or may become allowable as a deduction under this section, that whole or part is not an allowable deduction, and is not to be taken into account in working out the amount of an allowable deduction, from the assessable income of the company of any year of income under any other provision of this Act. Definitions (7) In this section: aggregate research and development amount has the same meaning as in section 73B. eligible company has the same meaning as in section 73B. notional Division 42 deduction has the meaning given by section 73BJ. section 73BH plant has the meaning given by section 73BI. 73BI Meaning of section 73BH plant (1) A unit of section 73BH plant of an eligible company is a thing for which the eligible company could (ignoring section 73BH) deduct an amount under section 42‑15 of the Income Tax Assessment Act 1997 if the following assumptions were made: (b) the definition of plant in section 42‑18 of that Act included capital works (other than buildings) to which Division 43 of the Income Tax Assessment Act 1997 applies, or to which that Division would apply but for expenditure being incurred, or capital works being started, before a particular day; (c) the eligible company satisfied any relevant requirement for deductibility under that Division. (2) However, subsection (1) does not apply to a thing: (a) acquired, or constructed, under a contract entered into by the company at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or (b) that the company commenced to construct at or before 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001. (3) In this section: eligible company has the same meaning as in section 73B. 73BJ Meaning of notional Division 42 deduction Notional Division 42 deduction (1) An eligible company has a notional Division 42 deduction for a year of income for a unit of section 73BH plant if it would be entitled to a deduction for the plant under section 42‑15 of the Income Tax Assessment Act 1997 for the year of income assuming the changes set out in this section were made. First change: replacement of references to use or installation ready for use for purpose of producing assessable income (2) The first change is that references in Division 42 of the Income Tax Assessment Act 1997 to using the unit, or having it installed ready for use, for the purpose of producing assessable income are instead references to using the unit for the purpose of the carrying on by or on behalf of the eligible company of research and development activities. Second change: method for calculating deduction where previous Division 42 deduction (3) The second change is that, if the eligible company was actually entitled to a deduction under Division 42 of the Income Tax Assessment Act 1997 for the unit of section 73BH plant for any period before the start of the first period for which the company will be entitled to a deduction for the plant under this subsection, the same method for calculating the deduction as the company was using for the unit for the earlier period is used. Third change: treatment of expenditure to which section 73BK or 73BL applies (4) The third change is that, in working out the cost of the unit of section 73BH plant, any amount of expenditure (section 73BH plant expenditure) that would otherwise form part of that cost is to be ignored or treated in some other way if section 73BK or 73BL so provides for the purposes of this section. Fourth change: certain provisions to be ignored (5) The fourth change is that Division 42 of the Income Tax Assessment Act 1997 applies as if section 73BH of this Act and Subdivisions 42‑L and 42‑M of that Act had not been enacted. Definition (6) In this section: section 73BH plant has the meaning given by section 73BI. 73BK Treatment of certain expenditure for the purposes of section 73BJ etc. Requirement for registration under Industry Research and Development Act (1) Section 73BH plant expenditure incurred by an eligible company in a year of income in relation to research and development activities is ignored for the purposes of section 73BJ unless: (a) the company is registered, in relation to the year of income and in relation to those activities, under section 39J of the Industry Research and Development Act 1986; or (b) the company is registered, in relation to the year of income and in relation to a project comprising or including those activities, under section 39P of that Act. Non‑arm's length expenditure (2) If: (a) an eligible company has incurred an amount of section 73BH plant expenditure; and (b) the Commissioner is satisfied that: (i) having regard to any connection between the company and the person to whom the expenditure was incurred and to any other relevant circumstances, the company and that other person were not dealing with each other at arm's length in relation to the incurring of that expenditure; and (ii) the amount of that expenditure would have been less if the company and that other person had dealt with each other at arm's length in relation to the incurring of that expenditure; so much only of that expenditure is to be taken into account for the purposes of section 73BJ as the Commissioner considers reasonable having regard to: (c) the connection between the company and that other person; and (d) the amount of the expenditure that would, in the opinion of the Commissioner, have been incurred by the company if the company and that other person had dealt with each other at arm's length in relation to the incurring of that expenditure; and (e) such other matters as the Commissioner considers relevant. Effect of certificate under section 39M or 39MA of Industry Research and Development Act (3) Subject to subsection (8), if the Board gives to the Commissioner a certificate under section 39M or 39MA of the Industry Research and Development Act 1986 in respect of particular activities in respect of which section 73BH plant expenditure has been incurred by an eligible company, the expenditure is ignored for the purposes of section 73BJ. Effect of certificate under section 39N of Industry Research and Development Act (4) Subject to subsection (8), if the Board gives to the Commissioner a certificate stating that a company has failed to comply with a notice under section 39N of the Industry Research and Development Act 1986 in respect of particular activities in respect of which section 73BH plant expenditure has been incurred by an eligible company, the expenditure is ignored for the purposes of section 73BJ. Effect of certificate under subsection 39P(4) of Industry Research and Development Act (5) Subject to subsection (8), if the Board gives to the Commissioner a certificate in relation to a company or companies under subsection 39P(4) of the Industry Research and Development Act 1986, section 73BH plant expenditure in relation to research and development activities referred to in the certificate that is incurred by that company or any of those companies after the day on which notice was given to the company concerned under paragraph 39P(5)(a) is ignored for the purposes of section 73BJ. Effect of certificate under subsection 39PB(6) of Industry Research and Development Act (6) Subject to subsections (7) and (8), if the Board gives to the Commissioner a certificate in relation to a company or companies under subsection 39PB(6) of the Industry Research and Development Act 1986, section 73BH plant expenditure in relation to research and development activities referred to in the certificate that is incurred by that company or any of those companies after the day stated in the certificate is ignored for the purposes of section 73BJ. (7) Subsection (6) of this section does not apply to section 73BH plant expenditure in relation to research and development activities in respect of which a company is registered under section 39J of the Industry Research and Development Act 1986. Effect of revocation of certificates mentioned above (8) If a certificate mentioned in subsection (3), (4), (5) or (6) is revoked, this section applies, and is taken to have applied, as if the certificate had not been given. Expenditure on overseas research and development activities (9) Section 73BH plant expenditure incurred by an eligible company on overseas research and development activities is ignored for the purposes of section 73BJ unless the Board gave a provisional certificate in respect of the expenditure under section 39ED of the Industry Research and Development Act 1986 before the expenditure was incurred. Expenditure incurred on behalf of another person (10) Section 73BH plant expenditure incurred by an eligible company for the purpose of carrying on research and development activities on behalf of any other person is ignored for the purposes of section 73BJ. (11) Subsection (10) does not apply in relation to expenditure incurred on behalf of a partnership by a partner in the partnership in that partner's capacity as such a partner. Definitions (12) In this section: Board means the Industry Research and Development Board established by the Industry Research and Development Act 1986. eligible company has the same meaning as in section 73B. research and development activities has the same meaning as in section 73B. section 73BH plant has the meaning given by section 73BI. section 73BH plant expenditure has the meaning given by subsection 73BJ(4). 73BL Treatment of certain partnership expenditure for the purposes of section 73BJ etc. When section applies (1) If section 73BH plant expenditure has been incurred by a partnership in which, when the expenditure was incurred: (a) at least one partner was an eligible company; and (b) either: (i) each other partner was an eligible company or was a body corporate that was, or is taken to have been, registered under section 39F of the Industry Research and Development Act 1986 as a research agency in respect of the class of research and development activities on which the expenditure was incurred; or (ii) the partnership was designated as a Co‑operative Research Centre under the program known as the Co‑operative Research Centres Program; the following provisions have effect. Contributions by partners (2) Each partner is taken, for the purposes of sections 73BJ, 73C and 73CA of this Act, and Subdivision 20‑A of the Income Tax Assessment Act 1997, to have incurred so much (if any) of the expenditure as was incurred out of money contributed by the partner (otherwise than by way of loan), whether in the year of income in which the expenditure was incurred or a previous year of income. Recoupments or grants (3) If the partnership has, whether before or after the commencement of this subsection, received, or become entitled to receive, a recoupment of, or a grant in respect of, the whole or any part of the expenditure, each partner is to be taken, for the purposes of sections 73BJ, 73C and 73CA of this Act, and Subdivision 20‑A of the Income Tax Assessment Act 1997, to have received, or become entitled to receive, so much (if any) of the recoupment or grant as is worked out in accordance with the formula: where: partner's contribution means the total contribution made (otherwise than by way of loan) by the partner to the funds of the partnership as at the time when the recoupment or grant was received or the entitlement to the recoupment or grant arose, as the case may be. total contribution means the total of the contributions made (otherwise than by way of loan) by all the partners to the funds of the partnership as at the time when the recoupment or grant was received or the entitlement to the recoupment or grant arose, as the case may be. Exception to subsections (2) and (3) (4) If the partnership is not designated as a Co‑operative Research Centre under the program known as the Co‑operative Research Centres Program, subsection 73C(2A) does not apply in relation to the expenditure that a partner is taken to have incurred by subsection (2) or (3) of this section. Effect on net income and partnership loss calculation (5) Any expenditure that a partner is taken to have incurred by subsection (2) or (3) of this subsection, and any recoupment or grant that a partner is taken to have received or become entitled to receive, is not to be taken into account in determining the net income of the partnership or any partnership loss, as the case may be, of the year of income. Provisions to apply to each partner, not partnership (6) Subject to subsections (2) to (5) of this section, sections 73BJ, 73C and 73CA of this Act, and Subdivision 20‑A of the Income Tax Assessment Act 1997, apply in relation to each such partner that is an eligible company as if that partner, and not the partnership, were, or had been, carrying on the relevant project and activities, but so apply with such modifications to those sections as are appropriate having regard to the partner's interest in the partnership. Definitions (7) In this section: Board means the Industry Research and Development Board established by the Industry Research and Development Act 1986. eligible company has the same meaning as in section 73B. research and development activities has the same meaning as in section 73B. section 73BH plant has the meaning given by section 73BI. section 73BH plant expenditure has the meaning given by subsection 73BJ(4). 73BM Balancing adjustments: section 73BH plant (1) If: (a) a balancing adjustment event (within the meaning of subsection 42‑30(3) of the Income Tax Assessment Act 1997) happens in relation to a unit of section 73BH plant of an eligible company; and (b) one or more deductions have been allowed or are allowable to the eligible company under section 73BH for the unit for a year or years of income; and (c) no deduction was allowable to the eligible company under section 42‑15 of the Income Tax Assessment Act 1997 for the unit for any year of income; and (d) a deduction would be allowable to the eligible company, or an amount would be included in the eligible company's assessable income, in respect of the balancing adjustment event under Subdivision 42‑F of that Act as so in force, if: (i) the changes set out in section 73BJ were made; and (ii) section 42‑220A of the Income Tax Assessment Act 1997 and this section (other than this paragraph) had not been enacted; then the deduction mentioned in paragraph (d) is allowable to the eligible company, or the amount mentioned in paragraph (d) is included in the eligible company's assessable income, under this section for the year of income in which the balancing adjustment event occurs. Note: If deductions have been allowable under both section 73BH of this Act and section 42‑15 of the Income Tax Assessment Act 1997 for a unit of section 73BH plant, the balancing adjustment provisions of Division 42 of that Act apply in a modified way: see section 42‑220A of that Act. Increase in deduction or assessable amount where section 73BH deductions allowable at 1.25 rate (2) However, if at least one of the deductions mentioned in paragraph (1)(b) was worked out by multiplying a notional Division 42 deduction by 1.25, subsection (3) applies. (3) Any amount (the eligible subsection (1) amount): (a) allowable as a deduction to the eligible company under subsection (1) of this section for the unit of section 73BH plant; or (b) included in the assessable income of the eligible company under subsection (1) of this section for the unit of section 73BH plant, where that amount is so included as a result of the application of section 42‑190 of the Income Tax Assessment Act 1997 in accordance with paragraph (1)(d) of this section; is increased by the amount worked out using the formula: where: sum of all 1.25 rate notional Division 42 deductions means the sum of all notional Division 42 deductions that were multiplied by 1.25 in working out the deductions mentioned in paragraph (1)(b) for the unit of section 73BH plant. total decline in value means the cost of the unit of section 73BH plant, less its undeducted cost, just before the balancing adjustment event, where that cost and undeducted cost are the amounts taken into account in applying Subdivision 42‑F of the Income Tax Assessment Act 1997 in accordance with paragraph (1)(d) for the purpose of working out the deduction allowable to the eligible company, or the amount included in the eligible company's assessable income, under subsection (1) for the unit. Assessability of amounts received in respect of results etc. of research and development activities (4) Subject to subsections (5) and (6), if: (a) an eligible company has incurred any expenditure in respect of which: (i) a deduction under section 73BH has been allowed or is allowable to the company; or (ii) in the case of a company whose income was exempt from tax when the expenditure was incurred—a deduction under section 73BH would have been allowable if the company's income had not been so exempt from tax; and (b) the eligible company receives or is entitled to receive: (i) an amount in respect of the results of any of the research and development activities in relation to which the expenditure was incurred; or (ii) an amount attributable to the company having incurred the expenditure, including an amount that it is entitled to receive irrespective of the results of the activities; that amount is included in the company's assessable income of the year of income in which the company received or became entitled to receive it. (5) The reference in subsection (4) to a company receiving or being entitled to receive an amount in respect of the results of any research and development activities includes a reference to: (a) the company receiving or being entitled to receive an amount from the grant of access to, or the grant of a right to use, any of those results; and (b) the company receiving or being entitled to receive an amount from the disposal of, or of an interest in, any section 73BH plant or from the grant of a right to use any section 73BH plant where, as a result of the disposal or grant, another person has acquired a right of access to, or a right to use, any of those results; but does not include a reference to the company receiving or being entitled to receive an amount in consequence of the use by the company of any of those results. (6) If a company receives or is entitled to receive an amount as mentioned in paragraph (5)(b), the amount to be included in the company's assessable income under subsection (4) is only so much (if any) of the amount mentioned in that paragraph as exceeds the cost to the company of acquiring or constructing the section 73BH plant concerned. Definitions (7) In this section: eligible company has the same meaning as in section 73B. notional Division 42 deduction has the meaning given by section 73BJ. research and development activities has the same meaning as in section 73B. section 73BH plant has the meaning given by section 73BI. 73BN Effective life calculation under Division 42 of Income Tax Assessment Act 1997 to take into account use for purpose of carrying on research and development activities (1) This section has effect for the purposes of working out, under sections 42‑105, 42‑110 and 42‑112 of the Income Tax Assessment Act 1997 (whether in their application for the purposes of section 73BH of this Act or otherwise), the effective life of a unit of plant of an eligible company: (a) that was acquired, or constructed, under a contract entered into by the company after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001; or (b) that the company commenced to construct after 12 pm, by legal time in the Australian Capital Territory, on 29 January 2001. (2) If, at the time at which the effective life is worked out, it is reasonably likely that the plant will be used at some time by any eligible company for the purpose of the carrying on by or on behalf of the eligible company of research and development activities: (a) references in sections 42‑105, 42‑110 and 42‑112 of the Income Tax Assessment Act 1997 to the period the unit can be used by any entity for income producing purposes include references to the period the unit can be used by any eligible company for the purpose of the carrying on by or on behalf of the eligible company of research and development activities; and (b) for the purposes of subsection 42‑105(3) and paragraph 42‑112(5)(c) of that Act, it is to be concluded that no eligible company that can use the unit for the purpose of the carrying on by or on behalf of the eligible company of research and development activities will scrap the unit, will sell it for scrap value or less or will abandon it, for reasons attributable to technical risk in carrying on those activities. (3) In this section: eligible company has the same meaning as in section 73B. plant has the same meaning as in Division 42 of the Income Tax Assessment Act 1997. research and development activities has the same meaning as in section 73B of this Act. 12 Sub‑subparagraph 73C(6)(b)(iv)(C) After "73B", insert "or 73BH". 13 Subparagraphs 73C(7)(c)(ii) and (iv) After "73B", insert "or 73BH". 14 Subsection 73C(9) Omit "and paragraph 73B(15)(a)", substitute ", paragraph 73B(15)(a) and subsection 73BH(2)". 15 Subsection 73C(9) Omit "that subsection", substitute "those subsections". 16 Subsection 73C(10) After "73B", insert "or 73BH". 17 Subsection 73CA(2) After "73B", insert "or 73BH,". 18 Subsection 73CB(5) After "73B", insert "or 73BH". 19 After section 73E Insert: 73EB Section 73BM roll‑over relief on disposal of plant to another member of wholly‑owned group Roll‑over relief where CGT roll‑over relief allowed (1) This section applies to the disposal of a unit of section 73BH plant by an eligible company (the transferor) to another eligible company (the transferee) if: (a) the disposal involves a CGT event for which there is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (or would be, disregarding the exemption in section 118‑5 of that Act, so far as it relates to a car, motor cycle or similar vehicle, or to an interest in one); and (b) Subdivision 170‑D of the Income Tax Assessment Act 1997 does not apply to the disposal; and (c) subject to subsection (5), a deduction or deductions have been allowed or are allowable to the transferor in respect of the unit of plant under section 73BH; and (d) no deduction has been allowed or is allowable to the transferor in respect of the unit of plant under Division 42 (Depreciation) of the Income Tax Assessment Act 1997. No balancing charges for transferor (2) Section 73BM does not apply in respect of the disposal of the unit by the transferor. Effect on transferee (3) The transferee is entitled to a deduction under section 73BH worked out using the same effective life and method for working out deductions as the transferor was using in respect of the plant under that section. Additional consequences (4) For the purposes of Division 45 of the Income Tax Assessment Act 1997: (a) if the transferor, or a partnership of which the transferor was a member, leased the unit of plant to another entity for most of the time when the transferor or partnership held the unit—the transferee is taken also to have done so; and (b) if the transferor, or a partnership of which the transferor was a member, leased the unit to another entity—the transferee is taken also to have done so; and (c) if the main business of the transferor, or a partnership of which the transferor was a member, was to lease units of plant of that kind—the main business of the transferee is taken also to have been to lease units of plant of that kind. Subsequent applications of roll‑over relief—relief available even if no deduction for subsequent transferor (5) If, apart from this subsection, this section has applied to the disposal of the unit of section 73BH plant to the transferee, then, in working out whether it applies to a subsequent disposal of the unit of plant by: (a) the transferee; or (b) one or more subsequent successive transferees; this section has effect as if paragraph (1)(c) (which deals with deductions) were ignored. Notice to allow transferee to work out how this section applies (6) The transferor must give the transferee a notice containing enough information about the transferor's holding of the unit of plant for the transferee to work out how this section applies to the transferee's holding of it. (7) The transferor must give the notice within 6 months after the end of the transferee's year of income in which the disposal mentioned in subsection (1) occurred, or within a longer period allowed by the Commissioner. (8) The transferee must keep the notice until the end of 5 years after the earlier of these events: (a) the transferee disposes of the unit; (b) the unit is lost or destroyed. Penalty: 30 penalty units. (9) The Criminal Code applies to the offence in subsection (8). 20 Subsection 82AM(2) After "73B", insert "or 73BH". 21 Subsection 170(10A) After "73B,", insert "73BH, 73BM,". 22 Subsection 632(2) Omit "or 73B", substitute ", 73B or 73BH". 23 Subsection 642(2) After "73B,", insert "73BH,". 24 Subsection 245‑140(1) of Schedule 2C (table, column 2) After "73B", insert "or 73BH". 25 Subsection 57‑85(3) of Schedule 2D (table item 13) Omit "Section 73B", substitute "Sections 73B and 73BH". 26 Subsection 57‑110(2) of Schedule 2D (table item 7, column 3) After "and (27)", insert "and section 73BM". 27 Subsection 57‑110(2) of Schedule 2D (table item 7, column 4) After "Section 73B", insert "or 73BH". Income Tax Assessment Act 1997 28 Section 10‑5 (table item headed "research & development") After "disposal" insert "etc.". 29 Section 10‑5 (table item headed "research & development") After "to (27C),", insert "73BM,". 30 Section 10‑5 (table item headed "research & development") After "73B(27A), (27C)", insert ", 73BM(4), (6)". 31 Section 20‑5 (table item 5) After "73B(27A)", insert ", 73BM(4)". 32 Subsection 20‑30(2) (table item 2.8) After "73B", insert "or 73BH". 33 At the end of section 42‑25 Add: (4) If you can deduct an amount for the *plant under section 73BH of the Income Tax Assessment Act 1936: (a) for a period before the first period for which you can deduct an amount for the plant under this Division; or (b) for a period that starts at the same time as the first period for which you can deduct an amount for the plant under this Division; you must, for the purposes of this Division, use the same method as you used, or use, for the plant for the purposes of working out the deduction under section 73BH. 34 Subsection 42‑45(2) Omit "unless you have elected under subsection 73B(18) of the Income Tax Assessment Act 1936 that the research and development provisions are not to apply to the plant", substitute ", for which a deduction would be allowable under section 73B of the Income Tax Assessment Act 1936, unless you have made an election under subsection 73B(18) of that Act that that section does not apply to the plant". 35 Section 42‑65 (table item 9) Omit "the research and development provisions", substitute "section 73B of the Income Tax Assessment Act 1936". 36 Paragraph 42‑85(2)(a) Omit "section 73B", substitute "sections 73B and 73BH". 37 At the end of paragraph 42‑85(2)(a) Add: Note: Paragraph (a) does not have the effect that deductions for the same amount of any such expenditure will be allowable under both this Division and section 73B or 73BH. Such an outcome is prevented by section 42‑15 (including as applied by section 73BJ for the purposes of section 73BH) and subsections 73B(20) and 73BH(6). 38 At the end of section 42‑100 Add: Note: Section 73BN of the Income Tax Assessment Act 1936 modifies the way in which the effective life of plant is worked out for certain companies. That section applies if it is reasonably likely that the plant will be used for the purpose of the carrying on by or on behalf of the company of research and development activities (as defined in section 73B of that Act). 39 After section 42‑220 Insert: 42‑220A Plant for which there are deductions under section 73BH of Income Tax Assessment Act 1936 (research and development) Section applies if deductions for depreciation under section 73BH (1) This section applies if you have deducted or can deduct an amount for the *plant under section 73BH of the Income Tax Assessment Act 1936 for any income year. Application of sections 42‑190 to 42‑197 to take into account section 73BH deductions (2) If this section applies, you must, in applying sections 42‑190 to 42‑197 in relation to the *plant, assume that the changes set out in subsections (3) to (5) of this section were made. First change (3) The first change is that the references in any of sections 42‑190 to 42‑197, and in sections 42‑175 and 42‑200 and subsection 110‑55(4) as applied for the purposes of those sections, to amounts you have deducted or can deduct for depreciation of the *plant include references to the notional Division 42 deductions taken into account under section 73BH of the Income Tax Assessment Act 1936 in working out: (a) amounts you have deducted or can deduct for the plant under that section; and (b) if section 73EB of that Act applied to the disposal to you of the plant—amounts the transferor, and any earlier successive transferor, have deducted or can deduct for the plant under section 73BH. Second change (4) The second change is that the reference in paragraph 42‑175(1)(b) to any further amounts you could have deducted for depreciation of the plant for any period you were its owner or *quasi‑owner and used it, assuming you used it wholly for the purpose of producing assessable income during that period, includes a reference to: (a) any further amounts you could have deducted for the plant under section 73BH of the Income Tax Assessment Act 1936, for any period you were its owner or *quasi‑owner and used it, assuming that you used it wholly for the purpose of the carrying on by or on behalf of you of research and development activities (within the meaning of section 73B of that Act); and (b) if section 73EB of that Act applied to the disposal to you of the plant—any further amounts the transferor, and any earlier successive transferor, could have deducted for the plant under section 73BH of that Act for any period assuming that person was its owner or *quasi‑owner and used it wholly for the purpose of the carrying on by or on behalf of that person of research and development activities. Third change (5) The third change is that the reference in section 42‑195 to the extent to which you used the plant other than for the purpose of producing assessable income is instead a reference to the extent to which you used the plant other than for that purpose or the purpose of the carrying on by or on behalf of you of research and development activities. Increase in amounts deductible or certain assessable amounts where 1.25 rate deductions under section 73BH (6) If: (a) this section applies; and (b) the amount you have deducted or can deduct for the *plant under section 73BH of the Income Tax Assessment Act 1936, as mentioned in subsection (1) of this section, for at least one income year was worked out by multiplying a notional Division 42 deduction (within the meaning of section 73BJ) by 1.25; then subsection (7) applies. (7) Any amount (the eligible assessable/deductible amount) included in your assessable income for the plant under section 42‑190 (as applied in accordance with subsection (2) of this section), or any amount you can deduct for the *plant under section 42‑195 or 42‑197 (as applied in accordance with subsection (2) of this section), is increased by the amount worked out using the formula: where: sum of all 1.25 rate notional Division 42 deductions means the sum of all notional Division 42 deductions (see paragraph (6)(b)) that were multiplied by 1.25 in working out the amounts you have deducted or can deduct for the plant as mentioned in subsection (1). total decline in value means the *cost of the plant, less its *undeducted cost, just before the balancing adjustment event (after applying subsection (2) of this section). Note: The heading to section 42‑220 is replaced by the following heading "Plant for which there are deductions under section 73B of Income Tax Assessment Act 1936 (research and development)". 40 At the end of section 42‑365 Add: (2) However, you cannot allocate *plant to a *pool if you can deduct an amount for the plant under section 73BH of the Income Tax Assessment Act 1936 for a period before, or starting at the same time as, the allocation would have effect. 41 At the end of section 42‑455 Add: (4) However, you cannot choose to allocate *low‑cost plant to a *low‑value pool if you can deduct an amount for the plant under section 73BH of the Income Tax Assessment Act 1936 for a period before, or starting at the same time as, the allocation would have effect. 42 Paragraph 43‑70(2)(g) After "73B", insert "or 73BH". 43 Subsection 108‑55(1) (table item 3) After "73B", insert "or 73BM". 44 Subsections 118‑35(1), (2) and (3) After "73B(27A)", insert "or 73BM(4)". Industry Research and Development Act 1986 45 Subparagraph 39EB(3)(c)(ii) After "73B", insert "or 73BH". 46 Subsection 39EC(1) After "73B", insert "or 73BH". 47 Subparagraph 39EC(2)(d)(iii) After "73B", insert "or 73BH". 48 Paragraphs 39EE(1)(c) and (2)(b) and 39EF(2)(b) After "73B", insert "or 73BH". 49 Subsection 39HH(2) (note) After "73B", insert "or 73BH". 50 Paragraph 39N(3)(b) Omit "subsection 73B(33A)", substitute "subsections 73B(33A) and 73BM(4)". 51 Application The amendments made by this Division to the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 apply to assessments for the income year in which 29 January 2001 occurs and for later income years. Division 2—Amendments commencing immediately after the New Business Tax System (Capital Allowances) Act 2001 Income Tax Assessment Act 1936 52 Subsection 73B(1) (after paragraph (ba) of the definition of aggregate research and development amount) Insert: (baa) the amount of any notional Division 40 deduction (as defined in section 73BC) taken into account in working out a deduction allowed or allowable to the company under section 73BA in respect of the year of income, or that would have been so allowed or allowable if the company had not chosen a tax offset under section 73BI; and 53 Subsection 73B(1) (paragraph (b) of the definition of excluded plant expenditure) Before "unit", insert "section 73BA depreciating asset (as defined by section 73BB) or a". 54 After section 73B Insert: 73BA Deduction for certain assets etc. used for the purpose of carrying on research and development activities Object (1) The object of this section is to provide a tax incentive, in the form of a deduction, to make eligible companies more internationally competitive by: (a) encouraging the development by eligible companies of innovative products, processes and services; and (b) increasing investment by eligible companies in defined research and development activities; and (c) promoting the technological advancement of eligible companies through a focus on innovation and high technical risk in defined research and development activities; and (d) encouraging the use by eligible companies of strategic research and development planning; and (e) creating an environment that is conducive to increased commercialisation of new processes and product technologies developed by eligible companies. The benefits of the tax incentive are targeted by being limited to particular expenditure on certain defined activities. Entitlement to deduction (2) If an eligible company has a notional Division 40 deduction for a section 73BA depreciating asset for a year of income, the company is entitled to a deduction under this section for the asset for the year of income. Amount of deduction (3) If the eligible company's aggregate research and development amount for the year of income is more than $20,000, the deduction is equal to the notional Division 40 deduction multiplied by 1.25. If not, it equals the notional Division 40 deduction. No deduction if earlier STS or Division 40 low‑value pool deductions allowable (4) An eligible company is not entitled to a deduction under this section for a section 73BA depreciating asset for any period if the company was entitled to: (a) a deduction for the asset for any earlier period under Subdivision 328‑D (about STS taxpayers) of the Income Tax Assessment Act 1997; or (b) a deduction for the asset for any earlier period under Division 40 of that Act, in a case to which section 40‑440 (about low‑value pools) of that Act applied. Expenditure deductible etc. under this section not deductible under other provisions (7) If the whole or a part of an amount of expenditure incurred by an eligible company: (a) has been allowed or is or may become allowable as a deduction under this section; or (b) would have been so allowed or become so allowable if the company had not chosen a tax offset under section 73I; that whole or part is not an allowable deduction, and is not to be taken into account in working out the amount of an allowable deduction, from the assessable income of the company of any year of income under any other provision of this Act. Definitions (8) In this section: aggregate research and development amount has the same meaning as in section 73B. eligible company has the same meaning as in section 73B. notional Division 40 deduction has the meaning given by section 73BC. research and development activities has the same meaning as in section 73B. section 73BA depreciating asset has the meaning given by section 73BB. 73BB Meaning of section 73BA depreciating asset (1) A section 73BA depreciating asset of an eligible company is an asset for which the eligible company could (ignoring section 73BA) deduct an amount under section 40‑25 of the Income Tax Assessment Act 1997 if the following assumptions were made: (b) contrary to paragraph 40‑30(1)(c) and subsection 40‑30(2) of that Act, all intangible assets were excluded from the definition of depreciating asset in section 40‑30 of that Act; (c) subsection 40‑45(2) of that Act did not, except in the case of buildings, prevent that Division from applying to capital works to which Division 43 of the Income Tax Assessment Act 1997 applies, or to which that Division would apply but for expenditure being incurred, or capital works being started, before a particular day; (d) the eligible company satisfied any relevant requirement for deductibility under that Division. (2) In this section: eligible company has the same meaning as in section 73B. 73BC Meaning of notional Division 40 deduction (1) An eligible company has a notional Division 40 deduction for a section 73BA depreciating asset for a year of income if it would be entitled to a deduction under section 40‑25 of the Income Tax Assessment Act 1997 for the asset for the year of income assuming the changes set out in this section were made. First change: replacement of references to use or installation ready for use for purpose of producing assessable income or for taxable purpose (2) The first change is that references in Division 40 of the Income Tax Assessment Act 1997 (other than for the purposes of sections 40‑100, 40‑105 and 40‑110) to using the asset, or having it installed ready for use: (a) for the purpose of producing assessable income; or (b) for a taxable purpose; are instead references to using the asset for the purpose of the carrying on by or on behalf of the eligible company of research and development activities. Note: Section 73BG modifies sections 40‑100, 40‑105 and 40‑110 (about effective life) so that a reference to the research and development purpose is added to the existing references, rather than replacing them. Second change: method for working out decline in value where previous Division 40 deduction (3) The second change is that, if the eligible company was actually entitled to a deduction under Division 40 of the Income Tax Assessment Act 1997 for the section 73BA depreciating asset for any period before the start of the first period for which the company will be entitled to a deduction for the asset under this subsection, the same method for working out the decline in value as the company was using for the asset for the earlier period is used. Third change: treatment of expenditure to which section 73BD or 73BE applies (4) The third change is that, in working out the cost of the section 73BA depreciating asset, any amount of expenditure (section 73BA depreciating asset expenditure) that would otherwise form part of that cost is to be ignored or treated in some other way if section 73BD or 73BE so provides for the purposes of this section. Fourth change: certain provisions to be ignored (5) The fourth change is that Division 40 of the Income Tax Assessment Act 1997 applies as if section 73BA of this Act, and section 40‑425 and Subdivision 328‑D of that Act, had not been enacted. (6) In this section: eligible company has the same meaning as in section 73B. research and development activities has the same meaning as in section 73B. section 73BA depreciating asset has the meaning given by section 73BB. 73BD Treatment of certain expenditure for the purposes of section 73BC etc. Requirement for registration under Industry Research and Development Act (1) Section 73BA depreciating asset expenditure incurred by an eligible company in a year of income in relation to research and development activities is ignored for the purposes of section 73BC unless: (a) the company is registered, in relation to the year of income and in relation to those activities, under section 39J of the Industry Research and Development Act 1986; or (b) the company is registered, in relation to the year of income and in relation to a project comprising or including those activities, under section 39P of that Act. Non‑arm's length expenditure (2) If: (a) an eligible company has incurred an amount of section 73BA depreciating asset expenditure; and (b) the Commissioner is satisfied that: (i) having regard to any connection between the company and the person to whom the expenditure was incurred and to any other relevant circumstances, the company and that other person were not dealing with each other at arm's length in relation to the incurring of that expenditure; and (ii) the amount of that expenditure would have been less if the company and that other person had dealt with each other at arm's length in relation to the incurring of that expenditure; so much only of that expenditure is to be taken into account for the purposes of section 73BC as the Commissioner considers reasonable having regard to: (c) the connection between the company and that other person; and (d) the amount of the expenditure that would, in the opinion of the Commissioner, have been incurred by the company if the company and that other person had dealt with each other at arm's length in relation to the incurring of that expenditure; and (e) such other matters as the Commissioner considers relevant. Effect of certificate under section 39M or 39MA of Industry Research and Development Act (3) Subject to subsection (8), if the Board gives to the Commissioner a certificate under section 39M or 39MA of the Industry Research and Development Act 1986 in respect of particular activities in respect of which section 73BA depreciating asset expenditure has been incurred by an eligible company, the expenditure is ignored for the purposes of section 73BC. Effect of certificate under section 39N of Industry Research and Development Act (4) Subject to subsection (8), if the Board gives to the Commissioner a certificate stating that a company has failed to comply with a notice under section 39N of the Industry Research and Development Act 1986 in respect of particular activities in respect of which section 73BA depreciating asset expenditure has been incurred by an eligible company, the expenditure is ignored for the purposes of section 73BC. Effect of certificate under subsection 39P(4) of Industry Research and Development Act (5) Subject to subsection (8), if the Board gives to the Commissioner a certificate in relation to a company or companies under subsection 39P(4) of the Industry Research and Development Act 1986, section 73BA depreciating asset expenditure in relation to research and development activities referred to in the certificate that is incurred by that company or any of those companies after the day on which notice was given to the company concerned under paragraph 39P(5)(a) is ignored for the purposes of section 73BC. Effect of certificate under subsection 39PB(6) of Industry Research and Development Act (6) Subject to subsections (7) and (8), if the Board gives to the Commissioner a certificate in relation to a company or companies under subsection 39PB(6) of the Industry Research and Development Act 1986, section 73BA depreciating asset expenditure in relation to research and development activities referred to in the certificate that is incurred by that company or any of those companies after the day stated in the certificate is ignored for the purposes of section 73BC. (7) Subsection (6) of this section does not apply to section 73BA depreciating asset expenditure in relation to research and development activities in respect of which a company is registered under section 39J of the Industry Research and Development Act 1986. Effect of revocation of certificates mentioned above (8) If a certificate mentioned in subsection (3), (4), (5) or (6) is revoked, this section applies, and is taken to have applied, as if the certificate had not been given. Expenditure on overseas research and development activities (9) Section 73BA depreciating asset expenditure incurred by an eligible company on overseas research and development activities is ignored for the purposes of section 73BC unless the Board gave a provisional certificate in respect of the expenditure under section 39ED of the Industry Research and Development Act 1986 before the expenditure was incurred. Expenditure incurred on behalf of another person (10) Section 73BA depreciating asset expenditure incurred by an eligible company for the purpose of carrying on research and development activities on behalf of any other person is ignored for the purposes of section 73BC to the company. (11) Subsection (10) does not apply in relation to expenditure incurred on behalf of a partnership by a partner in the partnership in that partner's capacity as such a partner. Definitions (12) In this section: Board means the Industry Research and Development Board established by the Industry Research and Development Act 1986. eligible company has the same meaning as in section 73B. research and development activities has the same meaning as in section 73B. section 73BA depreciating asset has the meaning given by section 73BB. section 73BA depreciating asset expenditure has the meaning given by subsection 73BC(4). 73BE Treatment of certain partnership expenditure for the purposes of section 73BC etc. When section applies (1) If section 73BA depreciating asset expenditure has been incurred by a partnership in which, when the expenditure was incurred: (a) at least one partner was an eligible company; and (b) either: (i) each other partner was an eligible company or was a body corporate that was, or is taken to have been, registered under section 39F of the Industry Research and Development Act 1986 as a research agency in respect of the class of research and development activities on which the expenditure was incurred; or (ii) the partnership was designated as a Co‑operative Research Centre under the program known as the Co‑operative Research Centres Program; the following provisions have effect. Contributions by partners (2) Each partner is taken, for the purposes of sections 73BC, 73C and 73CA of this Act, and Subdivision 20‑A of the Income Tax Assessment Act 1997, to have incurred so much (if any) of the expenditure as was incurred out of money contributed by the partner (otherwise than by way of loan), whether in the year of income in which the expenditure was incurred or a previous year of income. Recoupments or grants (3) If the partnership has, whether before or after the commencement of this subsection, received, or become entitled to receive, a recoupment of, or a grant in respect of, the whole or any part of the expenditure, each partner is to be taken, for the purposes of sections 73BC, 73C and 73CA of this Act, and Subdivision 20‑A of the Income Tax Assessment Act 1997, to have received, or become entitled to receive, so much (if any) of the recoupment or grant as is worked out in accordance with the formula: where: partner's contribution means the total contribution made (otherwise than by way of loan) by the partner to the funds of the partnership as at the time when the recoupment or grant was received or the entitlement to the recoupment or grant arose, as the case may be. total contribution means the total of the contributions made (otherwise than by way of loan) by all the partners to the funds of the partnership as at the time when the recoupment or grant was received or the entitlement to the recoupment or grant arose, as the case may be. Exception to subsections (2) and (3) (4) If the partnership is not designated as a Co‑operative Research Centre under the program known as the Co‑operative Research Centres Program, subsection 73C(2A) does not apply in relation to the expenditure that a partner is taken to have incurred by subsection (2) or (3) of this section. Effect on net income and partnership loss calculation (5) Any expenditure that a partner is taken to have incurred by subsection (2) or (3) of this subsection, and any recoupment or grant that a partner is taken to have received or become entitled to receive, is not to be taken into account in determining the net income of the