68CCResearch and development tax credits: greater than $2 million approval

1. This section applies ignoring, for purposes of this subsection only, sections HB 1 and HG 2 of the Income Tax Act 2007 (which relate to entity transparency) and substituting as the relevant person the person’s partnership or look-through company, if a person chooses to apply this section, and—

2. has, or reasonably estimates that the person, together with any joint venture of which the person is a member, will have eligible research and development expenditure greater than $2 million for an income year; or
3. is a member of a group of companies that has or reasonably estimates that they will have eligible research and development expenditure greater than $2 million for an income year.

4. For the purposes of section LY 3(1)(d) of that Act, a person is approved for the income year to the extent to which—

6. the Commissioner approves the person’s criteria and methodologies, as provided by subsections (3) to (8), and—
   1. the person’s application for approval does not contain a material omission or misrepresentation; and
   2. the person complies with any conditions in the Commissioner’s approval; and
   3. there is no material change in the provisions in subpart LY of the Income Tax Act 2007 and any associated provisions; and
   4. the person has, for the income year, given to the Commissioner a research and development certificate with the person’s research and development supplementary return (see: sections 33E and 124ZI).

7. The Commissioner may, in accordance with this section, approve a person’s criteria and methodologies for an income year (the first income year), the income year immediately before (the prior year), and up to 2 income years immediately after, if the person makes an application in accordance with subsection (4) on or before the last day of the 6th month before the end of the first income year (application date). For a prior year, the Commissioner may only approve supporting research and development activities described in section LY 5(1)(ab)(i) of the Income Tax Act 2007. The Commissioner may accept and approve an application after the application date if the taxpayer has changed the end date of their income year due to a change in their balance date for the first income year.

8. A person must apply to the Commissioner for approval in the form prescribed by the Commissioner, including—

9. the criteria and methodologies the person wants the Commissioner to approve; and
10. the income years for which approval of a criterion or methodology is sought; and
11. any other information required by the Commissioner.

12. If a person’s criteria and methodologies materially change during the period of an approval, and they want the change to be covered by the approval, they must apply to the Commissioner for a variation of the approval by the deadline in subsection (8).

13. The Commissioner may approve—

14. appropriate criteria and methodologies for determining whether an activity is a core research and development activity, a supporting research and development activity, or not a research and development activity at all:
15. appropriate criteria and methodologies for determining whether an amount of expenditure or loss is or is not an amount of eligible research and development expenditure.

16. If the Commissioner approves a person’s criteria and methodologies for an income year, the Commissioner must notify to the person those criteria and methodologies of the person that the Commissioner approves of, for which income years, and any conditions upon which the approval is made.

17. The Commissioner must notify the person of the intention to decline the application before the application is declined.

18. The Commissioner may vary an approval, upon application, if the variation application meets the requirements in subsection (2)(b), the variation applied for meets the requirements of subsection (5), and the application is made on or before the 7th day of the 2nd month after the end of the relevant income year. If the Commissioner accepts the variation, then the Commissioner must notify the person in accordance with subsection (6).

19. The Commissioner may revoke an approval, with effect from the beginning of the income year in which the revocation is made, if the Commissioner considers that the person has classified an activity, or an expenditure or loss in such a way so as to defeat the purpose and application of subpart LY of the Income Tax Act 2007.