The Research and Development Tax Incentives
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Added on 2020-05-28
The Research and Development Tax Incentives
Added on 2020-05-28
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Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthors NoteCourse ID
TAXATION LAW1Research and development activities receive tax incentives: IntroductionThe research and development tax incentives helps in providing tax incentivesencouragement to the small companies in engaging in Research and Development forbenefiting Australia. The Australian taxation office provides tax offsets for eligible researchand development activities. For small companies the research and development possess twocore components (Barkoczy, 2016). The first component is concerned with the tax offset forcertain kinds of eligible entities whose average turnover is below than $20 million and thesecond component deals with the non-refundable tax offset for all the entities that are ediblefor claiming tax incentives. An important considerations regarding the research and development is that it helps inproviding tax offset for small companies that are performing eligible research anddevelopment activities by lowering the organizations income tax liabilities. The tax offsetsgenerally range from 38.5% to 43.5% that are available for the cost that is incurred on theactivities depending upon the yearly average turnover of companies (Tan et al., 2016). Discussion: The “taxation ruling of TR 92/2” is concerned with the application of section 73Afor the scientific research carried on by the business or entities (Snape & De Souza, 2016).The “taxation ruling of 92/2” provides the explanation relating to the types of expenditurethat is incurred by the small business in performing the scientific research will be consideredfor deductions under subsection “73A (1) of the ITAA 1936”. The income tax deductions forthe small business will be only allowed under the “subsection 73A (1)” given that theexpenditure is not allowable under any other section of the Act.
TAXATION LAW2 For a small business deduction on the expenditure of research and developmentwould be considered under subsection if the payments to the approved research institutes forthe carrying out the scientific research that is related to the taxpayers of small business. Onthe other hand income tax deductions would be allowed under “subsection 73A (1)” giventhat the payments to the research institutes that possess their purpose of undertaking theresearch that is associated with the taxpayers category of business (Cao et al., 2015). For asmall business deduction would be considered if the expenditure incurred by the taxpayer inits business is having the nature of capital and the expenses in incurred in performing its ownresearch that is associated the taxpayers own business. However, under “taxation ruling ofTR 92/2” no allowable deductions would be permitted under the subsection for the paymentsto carry out the research that is made to the bodies other than the approved research institutes.Ever since the enactment of the “Section 73A” the taxpayers are provided with thefacilities of claiming tax deductions for the expenses that are incurred on the scientificresearch and the same would not have been considered allowable under the another provisionof the Act namely “section 51” (Saad, 2014). The section lay down that no allowabledeductions would be considered unless the criteria of “section 73A” is met by small business.According to “section 73A” expenditure possess four categories which will beconsidered for the allowable deductions. They are usually the payments that is made to theinstitutes to approve the research, expenses that are of capital in nature to conduct thescientific research associated with the business (Braithwaite, 2017). Deductions can beclaimed by small business taxpayers for the expenses incurred on the plant expenses giventhe plant is used in determining the scientific research and deductions on capital expenses onbuildings.
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