If an R&D entity - or its associates - has received, or could be reasonably expected to receive, consideration for the expenditure being incurred, regardless of the outcome of the R&D activities, the expenditure relating to those R&D activities is not at risk. Expenditure which is not considered at risk is not eligible under the R&D Tax Incentive provisions.
In instances where you are receiving consideration to undertake R&D activities, particularly when this consideration is being received irrespective of R&D results, this section should always be considered. In saying this, the fact that consideration is being received is not in itself enough to preclude you from seeking a tax offset under the R&D Tax Incentive.
This provision is subjective and has yet to be formally tested, and therefore requires case-by-case analysis to determine eligibility of expenditure based on the facts. It is also necessary to first assess the R&D activities under the 'on own behalf' provision.
In undertaking analyses relating to expenditure at risk, it is imperative to review contractual agreements between parties, specifically in terms of financial arrangements and the circumstances in which you may expect to recover funds relating to R&D activities.
Please contact KPMG R&D Tax Incentive specialists for advice on this matter.