Feedstock is the material an experiment consumes and turns into something tangible. The R&D Tax Incentive pays an offset on that material, so when the output is sold or put to use, section 355-445 makes the company give back the incentive part. It is one of the three clawback triggers.
What triggers it
All of these must be true:
- the company claimed notional deductions for feedstock inputs (goods or materials), for energy input directly into transforming them, or for the decline in value of assets used to acquire or produce those inputs;
- the R&D produced one or more tangible products (feedstock outputs); and
- in the current year an output, or a product made from it, is supplied to another entity or applied to the company's own use, other than to transform it further for supply.
Supply or use by a connected entity or affiliate counts too.
How the amount is worked out
The clawback amount is the lesser of feedstock revenue and the feedstock expenditure reasonably attributable to that output. Where the output is processed further before sale, the ATO apportions the sale value by cost of the feedstock output over cost of the finished product. Section 355-450 then includes only the incentive component in assessable income, grossed up at the current tax rate.
Three rules prevent double counting: an output feeding a later R&D activity is adjusted only at the end of the chain; recurring own use triggers once; and a later sale of an output already adjusted for own use triggers nothing.
Where it shows up
Feedstock is common in manufacturing scale-up, pilot plants and agtech field trials. The amount is reported in Part B of the R&D schedule, which the company's accountant prepares. Older references, including TA 2017/5, point to section 355-465; feedstock now sits in section 355-445.