On 4 December 2013, the ATO released for public comment by 24 January 2014 draft Taxation Determination TD 2013/D9 entitled "Income tax: when will Design Expenditure incurred by an R&D entity be included in the cost of a tangible depreciating asset within paragraph 355-225(1)(b) of the Income Tax Assessment Act 1997 (and therefore not able to be deducted under section 355-205)?"
The draft Taxation Determination is concerned with where an R&D entity incurs expenditure on various stages of design activities ( Design Expenditure ), connected with it beginning to hold a tangible depreciating asset, where that expenditure also falls within the terms of s 355-205.2 ITAA 1997. This expenditure will typically be incurred in cases where the R&D entity is constructing the asset itself, or having another entity construct it on its behalf, as distinct from acquiring the asset 'off the shelf'. The asset begins to be 'held' by the R&D entity at the time that construction is completed. At this time the R&D entity is the legal owner of the asset, and therefore, the holder under item 10 in the table in s 40-40.