What is "at Risk"? ATO Proposes Ruling on s73CA ITAA 1936

Now we're getting technical.

Ever since 1990, the R&D tax concession has included a provision to reduce the concessional rate of deduction for expenditure that is not "at risk" (s73CA ITAA 1936).

Originally introduced to prevent manipulation of the R&D tax concession under the syndication program, the commissioner has started to take a broader view and has commenced consultation on a proposed ruling. Naturally, this could have an impact for companies, as many have applied the "expenditure at risk" provisions as more narrowly applying to syndication, but the Commissioner's view is (unsurprisingly) broader.

With a focus on expenditure that could "reasonably be expected to be reimbursed, recouped or recompensed" the discussion paper will be debated on its broad interpretation.

The types of situations this might cover in the ATO's opinion include reimbursements (which may operate to deny a deduction entirely) and insurance coverage, guarantees and warranties, grants etc.

A discussion paper has been prepared by the ATO.