WARNING:
This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 16 August 1996.
CONTENTS
Industry Research and Development Amendment Bill
1996
Date Introduced: 26 June 1996
House: House of Representatives
Portfolio: Industry, Science and Tourism
Commencement: The amendments described in this
Digest, other than Item 13 of Schedule 1 of the Bill which will
commence on 6 December 1995, commence on Royal Assent.
To provide for advanced registration of bodies undertaking
eligible research and development expenditure and to impose
restrictions on the time by which applications for registration
must be made.
The principal assistance for industry to encourage investment in
research and development (R&D) is the 150% tax deduction
available in respect of eligible expenditure. The scheme was
introduced in May 1985 as a temporary measure, but was made
permanent in the 1992-93 Budget. The effectiveness of the scheme
has been examined in recent years by the Industry Commission (IC),
Bureau of Industry Economics (BIE) and the Australian National
Audit Office. The various studies were used by the Department of
the Treasury which examined the cost effectiveness of the tax
concession in the Winter 1995 edition of the Economic
Roundup. Main findings of the Treasury included:
- both the IC and the BIE found that the scheme provided net
benefits to Australia;
- the IC found that as much as 90% of R&D investment would
have occurred without the tax concession, while the BIE found that
the concession encouraged between 10% and 17% of R&D
expenditure;
- only 20% of R&D expenditure was on 'genuinely innovative'
projects; and
- investment decisions are often based on the tax consequences of
the investment rather than the nature of the R&D being
undertaken, particularly when investment syndicates are
involved.
The former government's response to the IC report was released
on 6 December 1995 and provided for the continuation of the 150%
tax deduction, subject to the tightening of certain eligibility
criteria, particularly regarding the registration requirements. The
general thrust of the former government's response was accepted by
the Coalition during the election campaign and the Minister and
Treasurer announced on 3 June 1996 that the measures, with some
minor modifications, would apply from the original date of
announcement, ie. 6 December 1995.
As noted above, the use of syndicates has tended to distort the
use of the tax concession away from R&D spending and towards
gaining the maximum tax benefit. Although not contained in this
Bill, the Minister and the Treasurer announced on 23 July 1996 that
new syndicates would not qualify for the tax concession after the
time of announcement, ie. 5 pm. on 23 July 1996. It was also
announced at that time that the eligibility criteria for the
deduction would be tightened with the aim of restricting the
deduction to actual expenditure on R&D. Again, these measures
are not contained in this Bill.
Estimates of Tax Expenditure issued by the Treasury estimate
that the scheme cost $400 million in 1992-93 and $525 million in
1993-94.
To be eligible for the 150% tax deduction, the organisation
claiming the deduction must be registered with the Industry
Research and Development Board which is established under the
Industry Research and Development Act 1986 (the Principal
Act).
Proposed sections 39HG to 39HI, which will be inserted into the
Principal Act by Item 4 of Schedule 1, provide for
organisations to seek registration in advance of incurring R&D
expenditure or during the year that such expenditure is incurred.
Registration may be sought for R&D expenditure that will be
incurred within 2 years after the year in which registration is
sought. Bodies are to be registered unless the Board is of the
opinion that the proposed activity is not R&D activity or they
are excluded by the regulations.
Section 39J of the Principal Act provides for the registration
of organisations that have incurred R&D expenditure in previous
years. Item 13 will amend section 39J to provide
that organisations are not to be registered after 2.30 pm. on 6
December 1995 in respect of expenditure incurred in 1992-3; that
applications for registration must be made before 7 June 1996 in
respect of 1993-94 or 1994-95; and for later years the application
must be made within 6 months of the end of the year of income.
Application: Item 13 will have effect from 2.30
pm. on 6 December 1995 (sub-clause 2(3)).
Item 23 of Schedule 1 inserts a new section 48A
into the Principal Act which allows for regulations to be made
prescribing fees that may be imposed under the Principal Act.
Chris Field Ph. 06 277 2439
15 August 1996
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.
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ISSN 1323-9032
© Commonwealth of Australia 1996
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Published by the Department of the Parliamentary Library,
1996.
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Last updated: 15 August 1996
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