73AExpenditure on scientific research

73A  Expenditure on scientific research  (1A) This section has effect subject to Division 245 of the Income Tax Assessment Act 1997.  (1) The following payments made, and expenditure incurred, during the year of income (other than any amount which is allowable as a deduction under any other section of this Act) by a person carrying on a business for the purpose of gaining or producing assessable income shall be allowable deductions:  (a) Payments to:  (i) an approved research institute for scientific research related to that business; or  (ii) an approved research institute, the object of which is the undertaking of scientific research related to the class of business to which that business belongs; and  (b) Expenditure of a capital nature on scientific research related to that business (except to the extent that it is expenditure on plant, machinery, land or buildings or on alterations, additions or extensions to buildings or in the acquisition of rights in or arising out of scientific research).  (2) Where, on or after the first day of the year of income ending on 30 June 1946, a taxpayer carrying on a business for the purpose of gaining or producing assessable income incurs expenditure of a capital nature in the construction or acquisition of a building, or part of a building, or in making any alteration or addition to a building, in which scientific research related to that business is to be carried on by or on behalf of the taxpayer, and the building, part of a building, alteration or addition, as the case may be, is of use for scientific research purposes only, an amount equal to one‑third of that expenditure shall be an allowable deduction:  (a) from the assessable income of the year of income in which the building, part of a building, alteration or addition is first used by or on behalf of the taxpayer for such scientific research; and  (b) from the assessable income of each of the 2 years of income next succeeding that year of income, if the taxpayer continues to carry on that business during the year in which that assessable income was derived.  (2A) Subsection (2) does not apply to expenditure incurred by a taxpayer in the construction of a building or part of a building, in the making of an alteration or addition to a building or in the acquisition of a building or part of a building unless:  (a) either of the following subparagraphs applies:  (i) that construction or making commenced, or that acquisition occurred, before 21 November 1987;  (ii) any contract in respect of that construction, making or acquisition was entered into before 21 November 1987; and  (b) if the expenditure was incurred after 20 November 1987—the taxpayer intended, on 20 November 1987, that:  (i) scientific research, being research related to a business carried on by the taxpayer for the purpose of gaining or producing assessable income, would be carried on by or on behalf of the taxpayer in the building; and  (ii) the building, part of the building, alteration or addition, as the case may be, would be of use for scientific research purposes only.  (3) Where any expenditure or payment to which this section refers is incurred or made outside Australia and the business in relation to which it is so incurred or made is carried on partly in and partly out of Australia, the deduction allowable under this section shall be such part of the amount which would otherwise be allowable as the Commissioner considers reasonable in the circumstances.  (4) Where any expenditure has been allowed or is allowable as a deduction under subsection (2) and:  (a) the taxpayer sells, transfers or otherwise disposes of the building or any part thereof; or  (b) the building or any part thereof is destroyed; the termination value of the building or part shall, to the extent of the expenditure so allowed or allowable as a deduction, be included in the assessable income of the year of income in which the disposal or destruction occurs: Provided that where the Commissioner is of opinion that part only, or no part, of that termination value relates to the disposal or destruction of any property which was acquired or created by that expenditure, that part only, or no part, as the case may be, of the termination value shall be taken into account for the purposes of this subsection.  (4A) If:  (a) a person has purchased from another person a building, or part of a building, where the vendor had incurred capital expenditure of a kind in respect of which deductions are or have been allowable under subsection (2); and  (b) it would be concluded that, having regard to any connection between the vendor and the purchaser or to any other relevant circumstances, those persons were not dealing with each other at arm’s length; and  (c) the purchase price is greater or lesser than the market value of the building, or the part of the building, at the time of the purchase; the purchase price is, for all purposes of the application of this Act in relation to the vendor, taken to have been the amount of the market value of the property at the time of the purchase.  (5) If the purchase of the building is a creditable acquisition by the vendor, references in subsection (4A) to the purchase price are taken to be references to that price reduced by the amount of the net input tax credit to which the purchaser is entitled for the acquisition. an approved research institute means the Commonwealth Scientific and Industrial Research Organization, or any university, college, institute, association or organization which is approved in writing for the purposes of this section by that Organization, by the Chief Executive Officer of the NHMRC or by the Research Secretary, as an institution, association or organization for undertaking scientific research which is or may prove to be of value to Australia. NHMRC means the National Health and Medical Research Council established by section 5B of the National Health and Medical Research Council Act 1992. Research Secretary means the Secretary of the Department administered by the Minister administering the Australian Research Council Act 2001. scientific research means any activities in the fields of natural or applied science for the extension of knowledge. termination value has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.  (7) An approval for the purposes of subsection (6) may:  (a) operate as from a date, whether before or after the date of the approval, specified in the instrument of approval; and  (b) be withdrawn at any time.  (8) In this section, any reference to scientific research related to a business or class of business shall be read as including a reference to:  (i) any scientific research which may lead to or facilitate an extension, or an improvement in the technical efficiency, of that business, or, as the case may be, of businesses of that class; and  (ii) any scientific research of a medical nature which is of special relation to the welfare of workers employed in that business or, as the case may be, in businesses of that class.  (9) This section does not apply in relation to payments made, or expenditure incurred, after 30 June 1995. 73AA  Section 73A roll‑over relief in the case of certain CGT roll‑overs Roll‑over relief where CGT roll‑over relief allowed  (1) This section applies to the disposal of a building, or part of a building, by a taxpayer (in this section called the transferor) to another taxpayer (in this section called the transferee) if:  (b) subject to subsection (7), deductions have been allowed or are allowable under subsection 73A(2) to the transferor in respect of the building or the part of the building; and  (c) the disposal involves a CGT event; and  (d) the conditions in an item in the table are satisfied.   - CGT roll‑overs that qualify transferor for relief - Item Type of CGT roll‑over Conditions - 1 Disposal of asset to wholly‑owned company There is a roll‑over under Subdivision 122‑A of the Income Tax Assessment Act 1997 for the CGT event. - 2 Disposal of asset by partnership to wholly‑owned company The transferor is a partnership, the building or part is partnership property, and there is a roll‑over under Subdivision 122‑B of the Income Tax Assessment Act 1997 for the disposal by the partners of the CGT assets consisting of their interests in the building or part. - 3 Marriage or relationship breakdown There is a roll‑over under Subdivision 126‑A of the Income Tax Assessment Act 1997 for the CGT event. - 4 Disposal of asset to another member of the same wholly‑owned group There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 for the CGT event. No balancing charges  (2) Subsection 73A(4) (which deals with balancing charges) does not apply to the disposal of the building or the part of the building by the transferor. Transferee to inherit certain characteristics from transferor  (3) Section 73A applies as if:  (a) the transferee had acquired the building or the part of the building for a consideration equal to the cost of the building or the part of the building to the transferor; and  (b) deductions were not allowable to the transferee under subsection 73A(2) in respect of:  (i) so much of the cost of the building or the part of the building to the transferor as was allowed or allowable as a deduction to the transferor under that subsection in respect of the building or the part of the building; or  (ii) if there have been 2 or more prior successive applications of this section—so much of the cost of the building or the part of the building to the transferor as was allowed or allowable as a deduction to the prior successive transferors under that subsection in respect of the building or the part of the building; and  (c) deductions were not allowable to the transferor under subsection 73A(2) in respect of the building or the part of the building for the year of income in which the disposal took place or for a subsequent year of income. Subsection 73A(2A)—special rules  (4) If subsection 73A(2A) applies to the transferor and in relation to the building or the part of the building, that subsection applies in relation to the transferee and in relation to the building or the part of the building. Disposal by transferee where no roll‑over relief—inheritance of deductions  (5) If:  (a) after the disposal of the building or the part of the building to the transferee, the building or the part of the building is lost or destroyed or the transferee disposes of the building or the part of the building; and  (b) in the case of a disposal by the transferee—this section does not apply to the disposal; then, for the purposes of the application of subsection 73A(4) in relation to the loss, destruction or disposal, the total of:  (c) the deductions allowed or allowable to the transferor under subsection 73A(2) in relation to the building or the part of the building; and  (d) if there have been 2 or more prior successive applications of this section—the deductions allowed or allowable to the prior successive transferors under subsection 73A(2) in relation to the building or the part of the building; are taken to have been deductions allowed or allowable to the transferee under subsection 73A(2) in relation to the building or the part of the building. Meaning of cost  (6) A reference in this section to the cost of a building or of a part of a building to the transferor is a reference to expenditure of a capital nature incurred by the transferor in the construction or acquisition of the building or the part of the building, or in making any alteration or addition to the building or to the part of the building. Second or subsequent application of section—paragraph (1)(b) does not apply  (7) If, apart from this subsection, this section has applied to the disposal of the building or the part of the building to the transferee, then, in working out whether this section applies to a subsequent disposal of the building or the part of the building by:  (a) the transferee; or  (b) one or more subsequent successive transferees; this section has effect as if paragraph (1)(b) (which deals with deductions) had not been enacted. 78A  Certain gifts not to be allowable deductions agreement includes any agreement, arrangement or understanding, whether formal or informal or express or implied, and whether or not enforceable by legal proceedings (whether or not the agreement, arrangement or understanding was intended to be so enforceable). associate, in relation to the donor of a gift, means:  (a) in the case of a donor being a natural person:  (i) a relative of the donor;  (ii) a partner of the donor;  (iii) if a partner of the donor is a natural person—the spouse of that partner;  (iv) a trustee of a trust estate where the donor or a person who is an associate of the donor by virtue of subparagraph (i), (ii), (iii) or (v) benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts; or  (v) a company where:  (A) the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the donor, of a person who is an associate of the donor by virtue of subparagraph (i), (ii), (iii) or (iv) or of a company that is an associate of the donor by virtue of another application of this subparagraph; or  (B) the donor is, the persons who are associates of the donor by virtue of subparagraphs (i), (ii), (iii) and (iv) are, or the donor and the persons who are associates of the donor by virtue of those paragraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company; or  (b) in the case of a donor being a company:  (i) a partner of the donor company;  (ii) if a partner of the donor company is a natural person—the spouse of that partner;  (iii) another person where:  (A) the donor company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person, whether those directions, instructions or wishes are communicated directly to the donor company or its directors, or through any interposed companies; or  (B) that person is, or that person and the persons who, if that person were the donor, would be associates of that person by virtue of paragraph (a) or by virtue of another subparagraph of this paragraph are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the donor company;  (iv) a trustee of a trust estate where the donor company or a person who is an associate of the donor company by virtue of subparagraph (i), (ii), (iii), (v) or (vi) benefits, or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts;  (v) another company where:  (A) the other company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the donor company, of a person who is an associate of the donor company by virtue of subparagraph (i), (ii), (iii), (iv) or (vi) or of a company that is an associate of the donor company by virtue of another application of this subparagraph; or  (B) the donor company is, the persons who are associates of the donor company by virtue of subparagraphs (i), (ii), (iii), (iv) and (vi) are, or the donor company and the persons who are associates of the donor company by virtue of those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other company; or  (vi) another person who, if a third person who is an associate of the donor company by virtue of subparagraph (iii) were the donor, would be an associate of that third person by virtue of paragraph (a) or by virtue of another subparagraph of this paragraph.  (2) Subject to this section, a gift of money, or of property other than money, made by a person (in this section referred to as the donor) to a fund, authority, institution or person is not an allowable deduction under Division 30 of the Income Tax Assessment Act 1997 where:  (a) by reason of any act, transaction or circumstance that has occurred, will occur, or may reasonably be expected to occur, being an act, transaction or circumstance occurring as part of, in connexion with or as a result of:  (i) the making or receipt of the gift; or  (ii) any agreement or scheme entered into in association with the making or receipt of the gift;   the amount or value of the benefit derived by the fund, authority, institution or person as a consequence of the gift is, will be, or may reasonably be expected to be, less than the amount or value at the time when the gift was made of the property comprising the gift;  (b) by reason of any act, transaction or circumstance of a kind referred to in paragraph (a), any fund, authority, institution or person other than the fund, authority, institution or person to which the gift was made, makes, becomes liable to make, or may reasonably be expected to make or to become liable to make, a payment, or transfers, becomes liable to transfer, or may reasonably be expected to transfer or to become liable to transfer, any property, to any person or incurs, becomes liable to incur, or may reasonably be expected to incur or to become liable to incur, any other detriment, disadvantage, liability or obligation;  (c) by reason of any act, transaction or circumstance of a kind referred to in paragraph (a), the donor or an associate of the donor has obtained, will obtain or may reasonably be expected to obtain any benefit, advantage, right or privilege other than the benefit of any deduction that, but for this section, would be allowable from the assessable income of the donor under Division 30 of the Income Tax Assessment Act 1997; or  (d) by reason of any agreement or scheme entered into as part of or in association with the making of the gift, any property, other than property comprising the gift, has been acquired or will be acquired, whether directly or indirectly, from the donor or an associate of the donor by that fund, authority, institution or person or by another fund, authority, institution or person.  (3) Without limiting the application of subsection (2), where the terms and conditions on which a gift of property other than money is made are such that the fund, authority, institution or person to which the gift is made does not receive immediate custody and control of the property, does not have the unconditional right to retain custody and control of the property in perpetuity to the exclusion of the donor or an associate of the donor or does not obtain an immediate, indefeasible and unencumbered legal and equitable title to the property, paragraph (2)(c) shall be deemed to apply in relation to that gift.  (4) Paragraph (2)(a) does not prevent a deduction under Division 30 of the Income Tax Assessment Act 1997 from being allowed from the assessable income of the donor where the amount or value of the benefit derived by the fund, authority, institution or person as a consequence of the gift is, will be, or may reasonably be expected to be, less than the amount or value at the time when the gift was made of the property comprising the gift by reason only that the fund, authority, institution or person has incurred, will incur, or may reasonably be expected to incur, expenses for the purpose of obtaining or soliciting the gift, being expenses that, in the opinion of the Commissioner, are reasonable in relation to the value of the gift.  (5) This section does not prevent a deduction under section 30‑15 of the Income Tax Assessment Act 1997 (because of item 4, 5 or 6 of the table in that section) from being allowed from the assessable income of the donor in respect of a gift of property other than money by reason only that the terms and conditions on which the gift was made are such, or the effect of any arrangement (within the meaning of that Act) entered into in association with the making or receipt of the gift is such, that the value of the gift may be reduced in accordance with section 30‑220 of that Act.