Section 355-225(1)(b) keeps the cost of a tangible depreciating asset out of ordinary R&D expenditure. The asset still counts, but through Subdivision 355-E: the company notionally deducts its decline in value, worked out under Division 40, for the time and extent it was used for R&D.
The conditions
Under section 355-305(1) the company must:
- be registered for the income year for R&D activities that meet the section 355-210 conditions;
- hold the asset and use it in the year to conduct those activities;
- be able to deduct an amount under section 40-25 if Division 40 applied as modified by section 355-310; and
- not have deducted an amount for the asset in an earlier year under the small business pool rules or through a low-value pool.
Working out the extent of R&D use
The law asks for the extent of use for R&D, not a set method. A reasonable approach follows how each asset is actually used:
- an asset issued to one person takes that person's R&D share of time;
- a shared asset, such as a GPU server or lab instrument, takes the R&D share of its use: measured use from scheduler, booking or run logs where the company has it, otherwise its users' R&D share, with a note of why that is a fair proxy;
- an asset bought only for registered experiments, such as a test rig, can have its whole decline in value claimed, with a record that it was used for nothing else.
What is excluded, and what happens on disposal
Buildings and capital works are excluded, and only tangible assets qualify. An asset paid for out of CRC contributions or Commonwealth CRC funding cannot be claimed (see Cooperative Research Centre). When an asset is sold or scrapped, a balancing adjustment applies, and a further clawback or catch-up deduction adjusts the incentive part. Assets matter most for prototypes and tooling and pilot plants, while cloud compute costs are expenses instead.