Section DB 34 — Income Tax Act 2007: Research or development

DB 34 Research or development Deduction (1) A person is allowed a deduction for expenditure they incur on research or development. This subsection applies only to a person described in any of subsections (2) to (5) and does not apply to the expenditure described in subsection (6). Person recognising expenditure as expense (2) Subsection (1) applies to a person who recognises the expenditure as an expense for financial reporting purposes— (a) under paragraph 5.1 or 5.2 of the old reporting standard or because paragraph 5.4 of that standard applies; or (b) under paragraph 68(a) of the new reporting standard applying, for the purposes of that paragraph, paragraphs 54 to 67 of that standard. Person not recognising expenditure as asset [Repealed] (3) [Repealed] Person recognising expenditure otherwise (4) Subsection (1) also applies to a person who— (a) recognises the expenditure as an expense for financial reporting purposes because it is an amount written off as an immaterial amount for financial reporting purposes; and (b) would be required, if the expenditure were material, to recognise it for financial reporting purposes— (i) under paragraph 5.1 or 5.2 of the old reporting standard or because paragraph 5.4 of that standard applies; or (ii) under paragraph 68(a) of the new reporting standard applying, for the purposes of that paragraph, paragraphs 54 to 67 of that standard. Person with minor expenditure (5) Subsection (1) also applies to a person who— (a) incurs expenditure of $10,000 or less, in total, on research and development in an income year; and (b) has written off the expenditure as an immaterial amount for financial reporting purposes; and (c) has recognised the expenditure as an expense for financial reporting purposes. Exclusion (6) Subsection (1) does not apply to expenditure that the person incurs on property to which all the following apply: (a) the property is used in carrying out research or development; and (b) it is not created from the research or development; and (c) it is 1 of the following kinds: (i) property for which the person is allowed a deduction for an amount of depreciation loss; or (ii) property the cost of which is allowed as a deduction by way of amortisation under a provision of this Act outside subpart EE (Depreciation); or (iii) land; or (iv) intangible property, other than depreciable intangible property; or (v) property that its owner chooses, under section EE 8 (Election that property not be depreciable) to treat as not depreciable. Choice for allocation of deduction (7) A person who is allowed a deduction under this section for expenditure that is not interest may choose to allocate all or part of the deduction— (a) to an income year after the income year in which the person incurs the expenditure; and (b) in the way required by section EJ 23 (Allocation of deductions for research, development, and resulting market development). Section need not be applied (8) A person may return income and expenditure in their return of income on the basis that this section does not apply to expenditure incurred on research or development in the income year to which the return relates. Relationship with section EA 2 (9) If expenditure to which this section applies is incurred in devising an invention that is patented, the expenditure is not treated as part of the cost of revenue account property for the purposes of section EA 2 (Other revenue account property). Link with subpart DA (10) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. Defined in this Act: amount , capital limitation , deduction , depreciable intangible property , depreciation loss , development , general limitation , general permission , income , income year , new reporting standard , old reporting standard , research , return of income , revenue account property , Compare: 2004 No 35 s DB 26 Section DB 34(2): substituted (with effect on 1 April 2008), on 7 December 2009, by section 11(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63). Section DB 34(2): amended, on 1 April 2008, by section 338(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section DB 34(3) heading: repealed, on 1 April 2008, pursuant to section 338(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section DB 34(3): repealed, on 1 April 2008, by section 338(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section DB 34(4)(a): amended, on 1 April 2008, by section 338(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section DB 34(4)(b): substituted (with effect on 1 April 2008), on 7 December 2009, by section 11(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63). Section DB 34(4)(b): substituted, on 1 April 2008, by section 338(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section DB 34(5)(b): substituted, on 1 April 2008, by section 338(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section DB 34 list of defined terms new reporting standard : inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63). Section DB 34 list of defined terms old reporting standard : inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63). Section DB 34 list of defined terms reporting standard : repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).