• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/26/2013

Australia - Who are these R&D activities for? 

September 26: Notional tax deductions arise in relation to expenditure incurred by an eligible research and development (R&D) entity on R&D activities.

However, notional tax deductions will not arise for R&D activities “conducted, to a significant extent, for one or more other entities” other than the R&D entity. This is known as the “for whom” test in Australia.

The purpose of the “for whom” test is to limit claims to cases when the company is a major benefactor from its expenditure on R&D activities, and to prevent duplication of claims by different entities when essentially the same R&D activities are involved.

In practice, the “for whom” test is a question of fact to be resolved through an assessment of three key criteria:

  • Who effectively owns the know-how, IP, or other results arising from the R&D entity’s expenditure on the R&D activities
  • Who has appropriate control over the conduct of the R&D activities
  • Who bears the financial burden of carrying out the R&D activities?

Read a September 2013 report prepared by the KPMG member firm in Australia: ‘For whom’ are R&D activities undertaken

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