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DB 33: Scientific research
or “Tax deductions for scientific research expenses”
You could also call this:

“Tax deductions for research and development spending”

You can get a tax deduction for money you spend on research or development. This applies in several situations:

If you record the spending as an expense in your financial reports, following certain accounting rules.

If you spend money developing something that’s not a physical object (like an idea or process) and later write it off in your financial records.

If you spend a small amount (up to $10,000) on research and development in a year and write it off as unimportant in your financial records.

The deduction doesn’t apply to things you use for research that aren’t created by the research itself, like equipment or land.

You can choose to spread the deduction over several years instead of claiming it all at once.

If you invent something and get a patent, the money you spent inventing it isn’t counted as part of the cost of the patent.

This rule overrides the usual rule that you can’t deduct capital expenses, but you still need to meet other tax rules to claim the deduction.

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Next up: DB 35: Some definitions

or “Definitions for research and development tax rules”
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Part D Deductions
Specific rules for expenditure types

DB 34Research or development

  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).

  2. Subsection (1) applies to a person who recognises the expenditure as an expense for financial reporting purposes—

  3. under paragraph 5.1 or 5.2 of the old reporting standard or because paragraph 5.4 of that standard applies; or
    1. under paragraph 68(a) of the new reporting standard applying, for the purposes of that paragraph, paragraphs 54 to 67 of that standard.

      1. Subsection (1) applies to a person who—

      2. incurs expenditure, on the development of an intangible asset that is not depreciable intangible property,—
        1. on or after 7 November 2013; and
          1. before the intangible asset is derecognised or written off by the person as described in paragraph (b); and
          2. derecognises or writes off the intangible asset for financial reporting purposes under—
            1. paragraph 112(b) of the new reporting standard; or
              1. paragraph 5.14 of the old reporting standard.

              2. Subsection (1) also applies to a person who—

              3. 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
                1. would be required, if the expenditure were material, to recognise it for financial reporting purposes—
                  1. under paragraph 5.1 or 5.2 of the old reporting standard or because paragraph 5.4 of that standard applies; or
                    1. under paragraph 68(a) of the new reporting standard applying, for the purposes of that paragraph, paragraphs 54 to 67 of that standard.

                    2. Subsection (1) also applies to a person who—

                    3. incurs expenditure of $10,000 or less, in total, on research and development in an income year; and
                      1. has written off the expenditure as an immaterial amount for financial reporting purposes; and
                        1. has recognised the expenditure as an expense for financial reporting purposes.

                          1. Subsection (1) does not apply to expenditure that the person incurs on property to which all the following apply:

                          2. the property is used in carrying out research or development; and
                            1. it is not created from the research or development; and
                              1. it is 1 of the following kinds:
                                1. property for which the person is allowed a deduction for an amount of depreciation loss; or
                                  1. 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
                                    1. land; or
                                      1. intangible property, other than depreciable intangible property; or
                                        1. property that its owner chooses, under section EE 8 (Election that property not be depreciable) to treat as not depreciable.

                                        2. A person who is allowed a deduction under this section for expenditure that is not interest and is described in subsection (2), (4), or (5) may choose to allocate all or part of the deduction—

                                        3. to an income year after the income year in which the person incurs the expenditure; and
                                          1. in the way required by section EJ 23 (Allocation of deductions for research, development, and resulting market development).

                                            1. A person who is allowed a deduction as provided by subsection (3) must allocate the deduction to the income year in which the relevant intangible asset is derecognised or written off by the person for financial reporting purposes under—

                                            2. paragraph 112(b) of the new reporting standard; or
                                              1. paragraph 5.14 of the old reporting standard.

                                                1. 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.

                                                2. 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).

                                                3. This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.

                                                Compare
                                                Notes
                                                • Section DB 34(2): substituted (with effect on 1 April 2008), on , by section 11(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                                                • Section DB 34(2): amended, on , by section 338(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                • Section DB 34(3) heading: replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 96(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                • Section DB 34(3): replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 96(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                • Section DB 34(4)(a): amended, on , 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 , 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 , by section 338(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                • Section DB 34(5)(b): substituted, on , by section 338(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                                • Section DB 34(7): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 96(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                • Section DB 34(7B) heading: inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 96(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                • Section DB 34(7B): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 96(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                • Section DB 34 list of defined terms new reporting standard: inserted (with effect on 1 April 2008), on , 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 , 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 , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).