INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90, 1986
INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90 of 1986 - LONG TITLE
An Act to provide income tax concessions for expenditure on research and development, and for related purposes INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90 of 1986 - SECT 1 Short title, &c.
(Assented to 25 June 1986) 1. (1) This Act may be cited as the Income Tax Assessment Amendment (Research and Development) Act 1986. (2) The Income Tax Assessment Act 1936*1* is in this Act referred to as the Principal Act.
(Minister's second reading speech made in- Senate on 30 May 1986 House of Representatives on 4 June 1986) *1* No. 27, 1936, as amended. For previous amendments, see No. 88, 1936; No. 5, 1937; No. 46, 1938; No. 30, 1939; Nos. 17 and 65, 1940; Nos. 58 and 69, 1941; Nos. 22 and 50, 1942; No. 10, 1943; Nos. 3 and 28, 1944; Nos. 4 and 37, 1945; No. 6, 1946; Nos. 11 and 63, 1947; No. 44, 1948; No. 66, 1949; No. 48, 1950; No. 44, 1951; Nos. 4, 28 and 90, 1952; Nos. 1, 28, 45 and 81, 1953; No. 43, 1954; Nos. 18 and 62, 1955; Nos. 25, 30 and 101, 1956; Nos. 39 and 65, 1957; No. 55, 1958; Nos. 12, 70 and 85, 1959; Nos. 17, 18, 58 and 108, 1960; Nos. 17, 27 and 94, 1961; Nos. 39 and 98, 1962; Nos. 34 and 69, 1963; Nos. 46, 68, 110 and 115, 1964; Nos. 33, 103 and 143, 1965; Nos. 50 and 83, 1966; Nos. 19, 38, 76 and 85, 1967; Nos. 4, 60, 70, 87 and 148, 1968; Nos. 18, 93 and 101, 1969; No. 87, 1970; Nos. 6, 54 and 93, 1971; Nos. 5, 46, 47, 65 and 85, 1972; Nos. 51, 52, 53, 164 and 165, 1973; No. 216, 1973 (as amended by No. 20, 1974); Nos. 26 and 126, 1974; Nos. 80 and 117, 1975; Nos. 50, 53, 56, 98, 143, 165 and 205, 1976; Nos. 57, 126 and 127, 1977; Nos. 36, 57, 87, 90, 123, 171 and 172, 1978; Nos. 12, 19, 27, 43, 62, 146, 147 and 149, 1979; Nos. 19, 24, 57, 58, 124, 133, 134 and 159, 1980; Nos. 61, 92, 108, 109, 110, 111, 154 and 175, 1981; Nos. 29, 38, 39, 76, 80, 106 and 123, 1982; Nos. 14, 25, 39, 49, 51, 54 and 103, 1983; Nos. 14, 42, 47, 63, 76, 115, 124, 165 and 174, 1984; No. 123, 1984 (as amended by No. 65, 1985); Nos. 47, 49, 104, 123, 129, 168, 173 and 174, 1985. INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90 of 1986 - SECT 2 Commencement
2. This Act shall come into operation on the day on which it receives the Royal Assent. INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90 of 1986 - SECT 3 Divisible deductions
3. Section 50G of the Principal Act is amended- (a) by inserting in paragraph (1) (a) "sub-section 73B (15) or (17)," after "sub-section 73A (2),"; and (b) by inserting after paragraph (2) (g) the following paragraphs: "(ga) where- (i) a divisible deduction is allowable to the company in relation to the year of income under section 73B in respect of expenditure incurred by the company in the acquisition or construction of a unit of plant or a building or an extension, alteration or improvement to a building; (ii) the year of income is the first year of income in which a deduction is allowable to the company under section 73B in respect of that expenditure; and (iii) the company incurred any of the expenditure referred to in sub-paragraph (i) before the commencement of, or during, the relevant period, so much of the amount of that divisible deduction as bears to the amount of that divisible deduction the same proportion as the number of whole days (if any) in the relevant period, being whole days occurring after the time when the company first incurred any of the expenditure referred to in sub-paragraph (i), bears to the number of whole days in the year of income, being whole days occurring after that time, shall be deemed to be an allowable deduction in respect of that relevant period; "(gb) where- (i) a divisible deduction is allowable to the company in relation to the year of income under section 73B in respect of expenditure incurred by the company in the acquisition or construction of a unit of plant or a building or an extension, alteration or improvement to a building; and (ii) the year of income is not the first year of income in which a deduction is allowable to the company under section 73B in respect of that expenditure, so much of the amount of that divisible deduction as bears to the amount of that divisible deduction the same proportion as the number of whole days (if any) in that relevant period bears to 365 shall be deemed to be an allowable deduction in respect of that relevant period;". INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90 of 1986 - SECT 4 Depreciation

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4. Section 54 of the Principal Act is amended by adding at the end the following sub-section: "(11) Depreciation of a unit of property, not being a unit in respect of which an election has been made under sub-section 73B (18), that has been installed ready for use exclusively for the purpose of the carrying on of research and development activities within the meaning of section 73B and that is held in reserve for that purpose is not an allowable deduction to a taxpayer under this section.".
INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90 of 1986 - SECT 5 Calculation of depreciation
5. Section 56 of the Principal Act is amended by inserting in sub-section (3) "section 73B," after "section 70,".
INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90 of 1986 - SECT 6 Disposal, loss or destruction of depreciated property
6. Section 59 of the Principal Act is amended by inserting after sub-section (2) the following sub-section:
"(2AA) For the purposes of the application of sub-section (2) to property of a taxpayer in respect of which a deduction or deductions has or have been allowed to the taxpayer under section 73B- (a) except in a case to which paragraph (b) applies-the difference between the cost of that property for the purposes of that section and the written-down value of that property for the purposes of that section shall be deemed to be an amount allowed under this Act in respect of depreciation; or (b) in a case where sub-section 73B (6) applied to the property-the difference between the amount that would, apart from that sub-section, have been the cost of the property for the purposes of that section and the written-down value of the property for the purposes of that section shall be deemed to be an amount allowed under this Act in respect of depreciation, but the amount of that difference shall not be taken into account in determining the depreciated value of the property.". INCOME TAX ASSESSMENT AMENDMENT (RESEARCH AND DEVELOPMENT) ACT 1986 No. 90 of 1986 - SECT 7
7. After section 73A of the Principal Act the following section is inserted:
Expenditure on research and development activities "73B. (1) In this section, unless the contrary intention appears- 'aggregate research and development amount', in relation to an eligible company in relation to a year of income, means the sum of- (a) the research and development expenditure incurred by the company during the year of income; (b) one-third of the total qualifying plant expenditure of the company in relation to the year of income; and (c) one-third of the total qualifying building expenditure of the company in relation to the year of income; 'annual leave' has the same meaning as in sub-section 26AC (4); 'approved research institute' has the same meaning as in section 73A; 'Board' means the Industry Research and Development Board established by the Industry Research and Development Act 1986; 'building' includes a part of a building; 'building expenditure', in relation to an eligible company, means expenditure of a capital nature incurred by the company in- (a) the acquisition, or the construction, under a contract entered into during the deduction period, of a building, or of an extension, alteration or improvement to a building owned or leased by the company; or (b) the construction by the company, being construction that commenced during the deduction period, of a building, or of an extension, alteration or improvement to a building owned or leased by the company, being a building, or an extension, alteration or improvement to a building, for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; 'consideration receivable' has the same meaning as in sub-section 59 (3); 'contracted expenditure' means expenditure incurred by an eligible company during the deduction period to an approved research institute or the Coal Research Trust Account in consideration for that institute performing, or that trust account funding the performance of, during the deduction period, research and development activities on behalf of the company; 'contributions to superannuation funds', in relation to an eligible company, means expenditure that would, apart from sub-section (20), be allowable as a deduction to the company under section 82aac; 'deduction acceleration factor', in relation to an eligible company in relation to a year of income, being a company having an aggregate research and development amount in relation to the year of income of more than $20,000, means- (a) in a case where the aggregate research and development amount in relation to the company in relation to the year of income is less than $50,000-the factor ascertained in accordance
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11A - 100,000 with the formula -------------, where A is the number 6A of whole dollars in the aggregate research and development amount in relation to the company in relation to the year of income; or (b) in any other case-1.5; 'deduction period' means the period commencing on 1 July 1985 and ending on 30 June 1991; 'eligible company' means a body corporate incorporated under a law of the Commonwealth or of a State or Territory; 'ineligible pilot plant amount', in relation to a unit of pilot plant to which sub-section (6) applies, means the difference between the amount that would, apart from the operation of sub-section (6), be the cost of the unit and $10,000,000; 'long service leave' has the same meaning as in sub-section 26AD (8); 'pilot plant' means an experimental model of plant for use in research and development activities or for use in commercial production, being a model that is not for use in commercial production but that has the intended essential characteristics of the plant of which it is a model; 'plant' means property that is plant or articles for the purposes of section 54; 'plant expenditure', in relation to an eligible company, means expenditure incurred by the company in- (a) the acquisition, or the construction, under a contract entered into during the deduction period, of a unit of plant; or (b) the construction by the company, being construction that commenced during the deduction period, of a unit of plant, being a unit of plant for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; 'research and development activities' means- (a) systematic, investigative or experimental activities that- (i) are carried on in Australia or in an external Territory; (ii) involve innovation or technical risk; and (iii) are carried on for the purpose- (A) of acquiring new knowledge (whether or not that knowledge will have a specific practical application); or (B) creating new or improved materials, products, devices, processes or services; or (b) other activities that- (i) are carried on in Australia or in an external Territory; and (ii) are carried on for a purpose directly related to the carrying on of activities of the kind referred to in paragraph (a); 'research and development expenditure', in relation to an eligible company in relation to a year of income, means expenditure (other than expenditure incurred in the acquisition or construction of plant or a building or of an extension, alteration or improvement to a building) incurred by the company during the year of income, being- (a) contracted expenditure of the company; (b) salary expenditure of the company, being expenditure incurred during the deduction period; or (c) other expenditure incurred during the deduction period directly in respect of research and development activities carried on by or on behalf of the company during the deduction period; 'salary expenditure', in relation to an eligible company in relation to a year of income, means the sum of- (a) the expenditure, not being expenditure referred to in paragraph (b), incurred by the company during the year of income by way of salaries, wages, allowances, bonuses, overtime payments or penalty rate payments for officers or employees of the company, being expenditure incurred directly in respect of research and development activities carried on by or on behalf of the company during the deduction period; (b) in relation to each officer or employee of the company who was engaged at any time during the year of income in research and development activities carried on by or on behalf of the company-so much of the expenditure incurred by the company during the year of income in respect of annual leave, sick leave or long service leave for that officer or employee or contributions to superannuation funds in respect of that officer or employee as bears to that amount the same proportion as the proportion of the year of income during which that officer or employee was engaged in research and development activities carried on by or on behalf of the company bears to the proportion of the year of income during which that officer or employee was engaged in any activities carried on by or on behalf of the company; and (c) so much of the expenditure incurred by the company during the year of
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income on pay-roll tax and premiums for workers' compensation insurance as the Commissioner considers reasonable having regard to- (i) the amount of the expenditure incurred by the company during the year of income to which paragraph (a) or (b) applies (other than expenditure by way of contributions to superannuation funds or expenditure that would, apart from sub-section 82AAC (2) or (3) or section 82AAE, be allowable as a deduction to the company under section 82AAC); (ii) the total expenditure incurred by the company during the year of income in respect of salaries, wages, allowances, bonuses, overtime payments, penalty rate payments, annual leave, sick leave and long service leave in respect of all officers and employees of the company; and (iii) such other matters as the Commissioner considers relevant; 'sick leave' means any period of leave in excess of 14 consecutive days, being leave, however described, granted by an employer (whether voluntarily, by agreement or in accordance with a law) to an employee in respect of the physical or mental incapacity of the employee; 'undeducted building expenditure', in relation to an eligible company in relation to a building or an extension, alteration or improvement to a building, means the amount (if any) ascertained by deducting from the amount of building expenditure in relation to that building or that extension, alteration or improvement, as the case may be, the amount or the sum of the amounts allowed or allowable as a deduction or deductions under sub-section (17) in relation to that building or that extension, alteration or improvement, as the case may be; 'written-down value', in relation to a unit of plant owned by a company, being a unit of plant in relation to which a deduction has been allowed under this section from the assessable income of the company, means- (a) except in a case to which paragraph (b) applies-the amount A- AB ascertained in accordance with the formula -----, where- 3 A is the cost of the unit of plant; and B is the number of years of income in respect of which a deduction has been allowed or is allowable under this section from the assessable income of the company in relation to the unit of plant; or (b) in a case where the unit of plant is pilot plant to which subsection (6) applies-the amount ascertained in accordance $10,000,000B with the formula A- ------------, where- 3 A is the amount that would, apart from the operation of sub-section (6), be the cost of the unit of plant; and B is the number of years of income in respect of which a deduction has been allowed or is allowable under this section from the assessable income of the company in relation to the unit of plant. "(2) For the purposes of the definition of 'research and development activities' in sub-section (1), activities that are carried on by way of- (a) market research, market testing or market development, or sales promotion (including consumer surveys); (b) quality control; (c) prospecting, exploring or drilling for minerals, petroleum or natural gas for the purpose of determining the size or quality of any deposits; (d) the making of cosmetic modifications or stylistic changes to products, processes or production methods; (e) management studies or efficiency surveys; (f) research in social sciences, arts or humanities; (g) the development of computer software otherwise than for the purpose of sale, rent, licence, hire or lease; or (h) the making of donations, shall be taken not to be systematic, investigative or experimental activities. "(3) A reference in this section to the incurring of expenditure by an eligible company does not include a reference to expenditure incurred by the company in the capacity of a trustee or nominee.
"(4) Subject to sub-section (5), where, during a year of income and before 1 July 1991- (a) an eligible company commences to use a unit of plant in respect of which the company has incurred an amount of plant expenditure exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; or (b) an eligible company commences to use a building, or an extension, alteration or improvement to a building, in respect of which the company has incurred an amount of building expenditure exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, that amount shall, in relation to that unit of plant, that building or that extension, alteration or improvement, as the case may be, be taken to be an amount of qualifying plant expenditure or qualifying building
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expenditure, as the case may be, in relation to the company in relation to the year of income and in relation to each of the 2 succeeding years of income. "(5) Where- (a) apart from this sub-section, there would be an amount of qualifying plant expenditure in relation to a unit of plant owned by an eligible company in relation to a year of income or an amount of qualifying building expenditure in relation to a building, or an extension, alteration or improvement to a building, owned by an eligible company in relation to a year of income; and (b) at any time during the year of income, the company ceases to use that unit of plant, that building or that extension, alteration or improvement, as the case may be, exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, there shall be no amount of qualifying plant expenditure in relation to that unit of plant or no amount of qualifying building expenditure in relation to that building, or that extension, alteration or improvement, as the case may be, in relation to the year of income or any succeeding year of income. "(6) Where, apart from this sub-section, the cost of a unit of pilot plant would exceed $10,000,000, the cost of the unit of pilot plant shall, for the purposes of this section, be taken to be $10,000,000.
"(7) For the purposes of this section, a building shall not be taken not to have been used exclusively for the purpose of the carrying on of research and development activities at a particular time if- (a) its use for that purpose had, at that time, ceased by reason only of a temporary cessation of use of the building by reason of the construction of an extension, alteration or improvement, or the making of repairs, to the building; or (b) it was, at that time- (i) maintained ready for use for that purpose; and (ii) not used or for use for any other purpose, and its use or intended use for that purpose had not been abandoned. "(8) A deduction is not allowable, and shall be deemed never to have been allowable, under this section in respect of expenditure incurred by an eligible company on research and development activities that form part of a project carried on by or on behalf of the company where the company is recouped or becomes entitled to be recouped, or receives a grant, in respect of any of that expenditure by or from the Commonwealth, a State or a Territory or an authority constituted by or under a law of the Commonwealth or of a State or Territory, and expenditure of that kind shall be disregarded for the purposes of the application of this section to the company.
"(9) A deduction is not allowable under this section in respect of expenditure incurred by an eligible company for the purpose of carrying on research and development activities on behalf of any other person, and expenditure of that kind shall be disregarded for the purposes of the application of this section to the company.
"(10) A deduction is not allowable under this section from the assessable income of an eligible company of a year of income unless the company is registered under sub-section (12) in relation to the year of income.
"(11) An eligible company may, in accordance with a form approved by the Board, make an application for registration under sub-section (12) in relation to a year or years of income.
"(12) Where- (a) an eligible company makes an application to the Board under sub-section (11); and (b) the company provides to the Board such information relating to the research and development activities of the company as the Board reasonably requires, the Board shall register the company in relation to such year or years of income (whether before or after the year of income in which the application was made) as the Board determines. "(13) Subject to this section, where an eligible company incurs contracted expenditure during a year of income, the amount of that expenditure multiplied by 1.5 is allowable as a deduction from the assessable income of the company of the year of income.
"(14) Subject to this section, where- (a) an eligible company incurs research and development expenditure (other than contracted expenditure) during a year of income; and (b) the aggregate research and development amount in relation to the company in relation to the year of income is greater than $20,000, the amount of that expenditure multiplied by the deduction acceleration factor in relation to the company in relation to the year of income is allowable as a deduction from the assessable income of the company of the year of income. "(15) Subject to this section, where, in the year of income during which an eligible company commences to use a unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities or in either of the 2 succeeding years of income, there is an amount of qualifying plant expenditure in relation to the company in relation to the unit of plant- (a) in a case where the aggregate research and development amount in relation to the company in relation to the year of income is greater than $20,000-one-third of the amount of that qualifying plant expenditure
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multiplied by the deduction acceleration factor in relation to the company in relation to the year of income; or (b) in any other case-one-third of the amount of that qualifying plant expenditure, is allowable as a deduction from the assessable income of the company of the year of income. "(16) For the purposes of the application of paragraphs (15) (a), (23) (e) and (24) (e) in relation to the year of income commencing on 1 July 1991 or 1 July 1992, the aggregate research and development amount in relation to the company in relation to the year of income shall be calculated as if- (a) the reference in the definition of 'deduction period' in sub-section (1) to 30 June 1991 were a reference to 30 June 1993; and (b) the reference in sub-section (4) to 1 July 1991 were a reference to 1 July 1993. "(17) Subject to this section, where, in a year of income, there is an amount of qualifying building expenditure in relation to an eligible company in relation to a building or an extension, alteration or improvement to a building, one-third of that expenditure is allowable as a deduction from the assessable income of the company of the year of income.
"(18) An eligible company may elect that this section shall not apply in relation to a unit of plant to which this section would otherwise apply and, where an election is so made, this section does not apply in relation to that unit of plant in relation to the company.
"(19) An election referred to in sub-section (18) in respect of a unit of plant- (a) shall be exercised by notice in writing to the Commissioner; and (b) shall be lodged with the Commissioner on or before the date of lodgment of the return of income of the eligible company for the first year of income in which a deduction under this section would be allowable to the company in respect of the unit of plant, or before such later date as the Commissioner allows. "(20) Subject to sub-sections (21), (22), (28) and (30), where the whole or a part of an amount of expenditure incurred by an eligible company has been allowed or is or may become allowable as a deduction under this section, that expenditure shall not be an allowable deduction, and shall not be taken into account in ascertaining the amount of an allowable deduction, from the assessable income of the company of any year of income under any other provision of this Act.
"(21) Sub-section (20) does not prevent a deduction for depreciation being allowed to an eligible company in respect of a unit of plant where the company has, before the end of the second year of income (in this sub-section referred to as the 'relevant year of income') after the year of income in which the company first used the unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, ceased to use the unit of plant exclusively for that purpose, and where, by reason of the subsequent use of the unit of plant for another purpose, such a deduction becomes allowable, the unit of plant shall be deemed to have been acquired by the company- (a) at a cost equal to the written-down value of the unit of plant; and (b) on- (i) in a case where the unit of plant was used by the company exclusively for that first-mentioned purpose on the first day of the relevant year of income-that day; or (ii) in any other case-the day on which the unit of plant was first used by the company for that first-mentioned purpose. "(22) Where deductions have been allowed to an eligible company under sub-section (15) in respect of expenditure incurred by the company in the acquisition or construction of a unit of plant to which sub-section (6) applies in respect of 3 years of income, sub-section (20) does not prevent a deduction for depreciation being allowed to the company in respect of the unit of plant in respect of a later year of income, and where such a deduction becomes allowable, the unit shall be deemed to have been acquired by the company immediately after the end of the last year of income in respect of which a deduction was allowed to the company under this section in respect of that expenditure at a cost equal to the written-down value of the unit of plant.
"(23) Where- (a) a deduction has been allowed or is allowable to an eligible company under sub-section (15) in respect of expenditure incurred in the acquisition or construction of a unit of plant (other than a unit of pilot plant to which sub-section (6) applies); (b) during a year of income, the unit of plant is disposed of, lost or destroyed; (c) the company had used the unit of plant before it was disposed of, lost or destroyed exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and (d) no deduction has been allowed or is allowable to the company under section 54 in respect of the unit of plant, then- (e) in a case where the consideration receivable in respect of the disposal, loss or destruction is less than the written-down value of the unit
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of plant- (i) if the aggregate research and development amount in relation to the company in relation to the year of income is greater than $20,000-the amount ascertained by multiplying the amount by which that written-down value exceeds that consideration receivable by the deduction acceleration factor in relation to the company in relation to the year of income; or (ii) if the aggregate research and development amount in relation to the company in relation to the year of income is less than or equal to $20,000-the amount by which that written-down value exceeds that consideration receivable, is allowable as a deduction from the assessable income of the company of the year of income; or (f) in a case where the consideration receivable in respect of the disposal, loss or destruction is greater than the written-down value of the unit of plant-so much of the excess as does not exceed the difference between the cost of the unit of plant and the written-down value of the unit of plant shall be included in the assessable income of the company of the year of income. "(24) Where- (a) a deduction has been allowed or is allowable to an eligible company under sub-section (15) in respect of expenditure incurred in the acquisition or construction of a unit of pilot plant to which sub-section (6) applies; (b) during a year of income, the unit of plant is disposed of, lost or destroyed; (c) the company had used the unit of plant before it was disposed of, lost or destroyed exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and (d) no deduction has been allowed or is allowable to the company under section 54 in respect of the unit of plant, then- (e) in a case where the consideration receivable in respect of the disposal, loss or destruction is less than the written-down value of the unit of plant but greater than the ineligible pilot plant amount in relation to the unit of plant-the amount ascertained by multiplying the amount by which that written-down value exceeds that consideration receivable by the deduction acceleration factor in relation to the company in relation to the year of income is allowable as a deduction from the assessable income of the company of the year of income; (f) in a case where the consideration receivable in respect of the disposal, loss or destruction is less than the ineligible pilot plant amount in relation to the unit of plant-the amount ascertained in accordance with the formula $5,000,000 A+B, where- A is 3 reduced by the number of years of income in respect of which a deduction has been allowed under this section to the company in respect of the unit of plant; and B is the amount by which that ineligible pilot plant amount exceeds that consideration receivable, is allowable as a deduction from the assessable income of the company of the year of income; or (g) in a case where the consideration receivable in respect of the disposal, loss or destruction is greater than the written-down value of the unit of plant-so much of the excess as does not exceed the difference between the amount that would, apart from the operation of sub-section (6), be the cost of the unit of plant and that written-down value shall be included in the assessable income of the company of the year of income. "(25) Where- (a) a deduction has been allowed or is allowable to an eligible company under sub-section (17) in respect of expenditure incurred by the company in the acquisition or construction of a building or of an extension, alteration or improvement to a building; and (b) while the building is owned by the company or, if the building was leased by the company at the time when that expenditure was incurred, while the building is leased by the company, the building or the extension, alteration or improvement, as the case may be, is destroyed, then- (c) in a case where there is an amount of undeducted building expenditure in relation to the company in relation to the building or the extension, alteration or improvement, as the case may be, and that amount exceeds the consideration receivable by the company in respect of the destruction-an amount equal to that excess is allowable as a deduction from the assessable income of the company of the year of income in which the destruction occurred; (d) in a case where there is an amount of undeducted building expenditure in relation to the company in relation to the building or the extension, alteration or improvement, as the case may be, and the consideration receivable by the company in respect of the destruction exceeds that amount-the assessable income of the company of the year of income in which the destruction occurred shall include so much of that excess as does not exceed the sum of the deductions allowed or allowable from the assessable income of the company under sub-section (17) in relation to the building or the extension, alteration or improvement, as the case may be; or
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(e) in a case where there is no amount of undeducted building expenditure in relation to the company in relation to the building or the extension, alteration or improvement, as the case may be-the assessable income of the company of the year of income in which the destruction occurred shall include so much of the consideration receivable by the company in respect of the destruction as does not exceed the sum of the deductions allowed or allowable from the assessable income of the company under sub-section (17) in relation to the building or the extension, alteration or improvement, as the case may be. "(26) Where- (a) a deduction has been allowed or is allowable to an eligible company under sub-section (17) in respect of expenditure incurred by the company in the acquisition or construction of a building or an extension, alteration or improvement to a building; and (b) while the building is owned by the company or, if the building was leased by the company at the time when that expenditure was incurred, while the building is leased by the company, a part (in this sub-section referred to as the 'destroyed part') of the building or of the extension, alteration or improvement, as the case may be, is destroyed, then- (c) in a case where there is an amount of undeducted building expenditure in relation to the company in relation to the building or the extension, alteration or improvement, as the case may be, and so much of that amount as is attributable to the destroyed part exceeds the consideration receivable by the company in respect of the destruction of the destroyed part-an amount equal to that excess is allowable as a deduction from the assessable income of the company of the year of income in which the destruction occurred; (d) in a case where there is an amount of undeducted building expenditure in relation to the company in relation to the building or the extension, alteration or improvement, as the case may be, and the consideration receivable by the company in respect of the destruction of the destroyed part exceeds so much of that amount as is attributable to the destroyed part-the assessable income of the company of the year of income in which the destruction occurred shall include so much of that excess as does not exceed so much of the sum of the deductions allowed or allowable from the assessable income of the company under sub-section (17) in relation to the building or the extension, alteration or improvement, as the case may be, as is attributable to the destroyed part; or (e) in a case where there is no amount of undeducted building expenditure in relation to the company in relation to the building or the extension, alteration or improvement, as the case may be-the assessable income of the company of the year of income in which the destruction occurred shall include so much of the consideration receivable by the company in respect of the destruction of the destroyed part as does not exceed so much of the sum of the deductions allowed or allowable from the assessable income of the company under sub-section (17) in relation to the building or the extension, alteration or improvement, as the case may be, as is attributable to the destroyed part. "(27) Where- (a) deductions have been allowed from the assessable income of an eligible company under sub-section (17) in respect of expenditure incurred by the company in the acquisition or construction of a building or an extension, alteration or improvement to a building; and (b) after the end of the period referred to in paragraph (28) (b), the company sells or otherwise disposes of the building or the extension, alteration or improvement, as the case may be, the assessable income of the company of the year of income in which the sale or other disposal occurred shall include- (c) in a case where deductions would, apart from this section, have been allowed or allowable from the assessable income of the company under Division 10D in respect of the expenditure referred to in paragraph (a)-the amount ascertained by deducting from so much of the consideration receivable in respect of the sale or other disposal as does not exceed the amount of the expenditure referred to in paragraph (a) the sum of the deductions that would, apart from this section, have been allowed or allowable from the assessable income of the company under Division 10D in respect of that expenditure; or (d) in any other case-so much of the consideration receivable in respect of the sale or other disposal as does not exceed the amount of the expenditure referred to in paragraph (a). "(28) Where- (a) a deduction is allowed from the assessable income of an eligible company under sub-section (17) in respect of expenditure incurred by the company in the acquisition or construction of a building or of an extension, alteration or improvement to a building; and (b) before the end of the period of 5 years commencing on the day on which the company commenced to use the building or the extension, alteration or improvement, as the case may be, exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, the company- (i) sells or otherwise disposes of the building or the extension, alteration or improvement, as the case may be; or
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(ii) ceases to use the building or the extension, alteration or improvement, as the case may be, exclusively for that purpose, any deduction allowed from the assessable income of the company under sub-section (17) in respect of the expenditure referred to in paragraph (a) shall, for the purposes of this section other than sub-section (20), be deemed never to have been allowable, and the expenditure incurred by the company in the acquisition or construction of the building or of the extension, alteration or improvement, as the case may be, shall be deemed never to have been qualifying building expenditure. "(29) Where- (a) sub-section (28) would, apart from this sub-section, apply to expenditure incurred by an eligible company in the acquisition or construction of a building or of an extension, alteration or improvement to a building; and (b) the Commissioner, having regard to- (i) the nature of the use by the company of the building or of the extension, alteration or improvement, as the case may be, both before and after the occurrence of the event referred to in paragraph (28) (b); (ii) the circumstances by reason of which that event occurred; (iii) the period during which the company carried on research and development activities and any period during which it is reasonable to expect that the company will continue to carry on those activities; and (iv) such other matters relating to the use of the building or the extension, alteration or improvement, as the case may be, or to the activities carried on by the company as the Commissioner considers relevant, is satisfied that it would be unreasonable for sub-section (28) to apply to that expenditure, that sub-section does not apply to that expenditure. "(30) Where- (a) sub-section (28) applies to expenditure incurred by an eligible company in the acquisition or construction of a building or an extension, alteration or improvement to a building; and (b) deductions would, apart from this section, have been allowable to the company under section 75B or 124JA or Division 10, 10AAA, 10AA or 10D in respect of that expenditure, section 75B or 124JA or Division 10, 10AAA, 10AA or 10D, as the case may be, applies to that expenditure as if this section had never applied to that expenditure. "(31) Where- (a) an eligible company has incurred an amount of research and development expenditure, or an amount of expenditure in the acquisition or construction of plant, a building or an extension, alteration or improvement to a building for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities; and (b) the Commissioner is satisfied that- (i) having regard to any connection between the company and the person to whom the expenditure was incurred and to any other relevant circumstances, the company and that other person were not dealing with each other at arm's length in relation to the incurring of that expenditure; and (ii) the amount of that expenditure would have been less if the company and that other person had dealt with each other at arm's length in relation to the incurring of that expenditure, so much only of that expenditure as the Commissioner considers reasonable having regard to- (c) the connection between the company and that other person; (d) the amount of the expenditure that would, in the opinion of the Commissioner, have been incurred by the company if the company and that other person had dealt with each other at arm's length in relation to the incurring of that expenditure; and (e) such other matters as the Commissioner considers relevant, shall be taken into account for the purposes of this section. "(32) Where- (a) an eligible company has sold or otherwise disposed of a unit of plant or a building or an extension, alteration or improvement to a building to another person; and