Exempt entities are not eligible for the R & D tax offset. An exempt entity is one whose income (ordinary and statutory) is exempt from income tax. Section 995 - 1 of Income Tax Assessment Act 1997 (ITAA 1997).

If you are controlled by an exempt entity the 45% refundable offset will not be available however, the 40% non - refundable tax offset may still be available. Typically your company will be controlled by an exempt entity when it:

1.    Owns shares or other equity interests that gives it at least 50% of the voting power in your company; or

2.    Has the right to receive at least 50% of any income or capital distributed by your company.