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A company is incorporated with a minimal amount of paid-up capital. The company accounts for GST and income tax on an accruals basis but generates negligible income. 2. The company enters an R&D services agreement with an RRA for the provision of R&D services for a period of up to 13 months, often within the last month of an income year. The agreement provides that the RRA will manage the R&D project and will engage sub-contractors to perform the work required under the agreement. The sub-contractors often may be associated with the company. 3. The RRA issues a tax invoice for an amount up to $1,100,000 [1] for the provision of future R&D services. 4. The RRA does not commence services, or provides only insignificant services, in the income year that the agreement is signed and the tax invoice is issued. The company makes no payments in respect of the agreement in that income year and the entire amount is said to have accrued. 5. The company lodges a Business Activity Statement ('BAS") for the period in which it received the tax invoice from the RRA and claims an input tax credit relating to the invoice. The company receives a refund of up to $100,000 ($1,100,000 x 1/11). 6. The company lodges its income tax return for the year in which it entered into the agreement with the RRA and reports that it has contracted expenditure to an RRA of an amount up to $1,000,000. The company elects to receive the R&D tax offset of up to $375,000 rather than a tax deduction ($1,000,000 x 125% x 30%). 7. The company applies funds from the GST refund and R&D tax offset to the balance owing under the R&D services agreement with the RRA. 8. In some instances funding arrangements to the company are provided by the RRA or parties associated with the RRA. This creates round robin cash-flows among the company, RRA and the parties associated with the RRA or the company.