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The concepts of aggregated turnover, connected entity and affiliate are important in determining the type of research and development (R&D) offset available to an R&D entity.  The determination of aggregated turnover can be a complex and time consuming exercise. Recently, the Australian Taxation Office (ATO) has issued four tax determinations to provide guidance to taxpayers when calculating their aggregated turnover. 

An entity’s aggregated annual turnover is a key determinant of the benefit available under the R&D Tax Incentive, and this will remain with the new intensity rates taken effect for income years commencing on or after 1 July 2021. 

The absence of an immediate and direct link between two entities does not, by itself, mean that the two entities cannot be affiliates or are not connected with each other. Definitions of ‘affiliate’ and ‘connected with’ – which are fundamental to determining the aggregated turnover of any company – can be complex and warrant careful consideration by R&D Tax Incentive claimants and their advisers.