Bills Digest No. 46 2000-01
ACIS Administration Amendment Bill 2000
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
ACIS Administration Amendment Bill 2000
Date Introduced: 6 September
2000
House: Senate
Portfolio: Industry, Science
and Resources
Commencement: On Royal
Assent.
To amend the ACIS Administration
Act 1999 in particular by extending the regulation
making power under that Act.
Overview
The Automobile Competitiveness and Investment Scheme
(ACIS) will be the largest industry-specific assistance to industry program
provided by the Commonwealth. It will operate for five years from 1 January
2001. It will provide assistance, in the form of import duty credits,
to producers of motor vehicles, components and automotive services for
both domestic and export markets. Assistance will be capped at $2 billion
over the five year program.
Participants will be eligible to earn import credits
on the basis of:
- their production of motor vehicles, engines or engine components (motor
vehicle producers only), and
- their investment in certain plant and equipment and research and development.
The Government has stressed that ACIS is to provide transitional
assistance over the next five years. The tariff on passenger motor vehicles
and certain parts will be reduced from 15 to 10 per cent on 1 January
2005.
The purpose of ACIS is to encourage competitive investment
and innovation in the Australian motor industry in order to achieve sustainable
growth. The industry Minister noted that ACIS has been designed to reward
innovative companies that are prepared to back Australia by investing
in its future.
Proposed Amendments
The ACIS Administration Act 1999 (the Act) was
assented to less than a year ago (3 November 1999). The proposed amendments
in the current Bill are described by Senator Ian Campbell in his Second
Reading Speech as minor amendments to enable the efficient delivery of
the program and to reduce the administrative burden on both participants
and the Government.(1)
The proposed main changes are directed at achieving:
- a tighter definition of 'approved plant and equipment' and 'approved
research and development' for use in identifying which expenditures
will be eligible for the assistance benefit
- clarification of the methods for calculating investment, including
the use of assistance loadings to cover the incidental costs of investment
which are difficult to quantify, and
- protection from 'artificial' companies set up to take advantage of
ACIS, that are not going to contribute to the sustainable growth of
the Australian automotive industry.
Schedule 1 Part 1 inserts new definitions of
'allowable', 'approved plant and equipment' and 'approved research and
development' in proposed new section 6A of the Act. Under the proposed
section, there are two aspects to approved plant and equipment or approved
research and development. These are, first, it must be allowable plant
and equipment or research and development, and second, the allowable plant
and equipment or research and development is only allowed to a given value
- the maximum claimable value in respect of that plant and equipment or
research and development. What is 'allowable' is to be declared by future
regulations. So too is 'maximum claimable value' for each kind of allowable
plant and equipment or research and development. This value is to be worked
out using a particular method to be set out in regulations, or stated
in the regulations in respect of that kind of allowable plant and equipment
or research and development.
'Participant' is defined in section 6 or the Act as a
person(2) or group who is registered as a motor vehicle producer
(MVP), automotive component producer (ACP), automotive machine tool or
tooling producer (AMTP), or automotive service provider (ASP). Proposed
section 6B provides that if approved plant and equipment is sold by
a participant or the participant ceases to control the plant and equipment,
then it ceases to be approved. According to the note to proposed section
6B when plant or equipment ceases to be approved plant or equipment
under that section then 'investment undertaken' in that plant and equipment
ceases to be relevant as type A, B, D, F or H investment. Types A, B,
D, F, and H investments are defined under the Act as investments by MVPs,
ACPs, AMTPs and ASPs relating to their approved plant and equipment.
Proposed new paragraph 6(5) allows regulations
to be made which will state at what point of time and in what circumstances,
when investment undertaken by a participant is taken to have occurred.
Proposed new section 6C will give the Secretary the ability in
'limited circumstances' to treat certain investments by one person as
eligible investments(3) undertaken by another person who is
a participant. The first person ('the original investor') may or may not
be a participant. Whether or not the Secretary can make a determination
will depend on the relationship between the original investor and the
participant. Under proposed new subsection 6C(2) the Minister may
make guidelines setting out the circumstances in which the relationship
between two persons are such circumstances. These guidelines are
disallowable instruments (proposed new subsection 6C(7)).
The Secretary is required to examine the circumstances
and may make a determination once he or she is satisfied that the circumstances
fall within the Ministerial guidelines (proposed new subsection 6C(3)).
Only after making this determination can the Secretary make a determination
under proposed new subsections 6C(4) and (5)). The first
of these proposed subsections relates to a determination when the original
investor is a participant at the time of the investment, and the second
proposed subsection relates to when the original investor was not a participant
at the time of the investment. In this latter case, if the Secretary is
satisfied that if the investment had been undertaken by a participant,
the investment would be eligible and it is reasonable in the circumstances
to allow the investment to be treated as eligible, then the Secretary
may make a determination in writing to that effect. Proposed new subsection
6C(6) also gives the Minister power to make guidelines as to what
can be taken into account by the Secretary for the purposes of proposed
new subsections 6C(4) and (5). Guidelines issued under proposed new
subsection 6C(6) are disallowable instruments.
Item 22 repeals existing sections 14 and 15 and
inserts proposed new sections 14, 14A, 14B and 15. Proposed
new subsection 14(1) simplifies the existing provisions requiring
that a person may only have one current registration under ACIS. As long
as a participant is registered individually, a group of related bodies
corporate,(4) of which the participant is a member, cannot
be registered (proposed new section 14(2)). Similarly, if
a group of related bodies corporate is a registered participant, then
a member of that group cannot be registered individually (proposed
subsection 14(3)). Proposed new section 15 provides that a
person's existing ACIS registration will be cancelled if a subsequent
registration application is approved by the Secretary. This strengthens
subclause 14(1).
Section 26 of the Principal Act allows for registration
as a participant under ACIS if the Secretary is satisfied as to form and
eligibility, and that the applicant or company is a fit and proper person.
Eligibility criteria are found in sections 16, 17, 18 and 19 of the Act
for MVP, ACP, AMTP and ASP applicants respectively. These criteria relate
principally to production in Australia measured by period of time, quantity,
value or quantum. Proposed new section 14A will additionally require
the Secretary to be satisfied that the registration would further the
purpose of the Act set out in section 3(5). The Explanatory
Memorandum advises that the effect of the clause allows the Secretary
to prevent the registration of a company set up artificially for the purposes
of ACIS that will not contribute to the sustainable growth of the automotive
industry.(6)
Item 25 effects a related amendment by inserting
proposed new paragraph 26(2)(g) requiring the Secretary to be satisfied
that a registration would, as required by new section 14(A), further the
purpose of the Act.
Section 110 of the Act sets out when the Secretary can
deregister a participant. One ground is that the participant has ceased
to be a fit and proper person. Other grounds include if the Secretary
determines that a participant cannot meet the requirements referred to
in sections 16-19 as to quantum, quality and value of production in Australia.
Item 46 adds new paragraph 110(5)(c) to allow the Secretary
to deregister a participant if he or she determines that the registration
does not further the purpose of the Act.
The Minister may make guidelines for the Secretary to
take into account when making a determination to register or deregister
an applicant under the proposed provisions (proposed new section
14B). These guidelines are disallowable instruments.
Items 27 and 28 add convictions against
the law of a foreign country as additional ground for failing to be a
fit and proper person for the purposes of the Act. There is no time limit
on when such offences were committed.
Items 31-34, and 36 repeal provisions of
the Act which require first quarterly returns, as this information will
be collected from the business plan submitted with an application. Existing
subsection 23(3) which requires the inclusion of a business plan, is amended
by item 24 to enable business plans to contain information from
1 January 1999. Items 37-43 enable the Secretary to calculate benefits
immediately rather than at the end of 45 days following each quarter.
Participants are required under section 35 of the Act
to lodge quarterly returns. The proposed amendments in Item 44
repeal and substitute new subsections 109(2), (3) and (4) so that
updates of business plans will be provided with each third quarter return,
rather than before 31 October each year. Further, item 45 amends
subsection 110(4) by deleting a reference to the period of 6 months, so
that in the event that a participant fails to lodge an updated business
plan, as required by section 109, the Secretary can deregister the participant.
Proposed new paragraphs 111(aa), (ab), (ac) and
(ad) extend the jurisdiction of the Administrative Appeals Tribunal
to decisions by the Secretary under new section 6C.
Part 2, items 48-62, makes amendments
throughout the Act as a consequence of the deletion of the word 'machine'
from the expression 'automotive machine tooling'.
Existing ACIS Administration regulations
The ACIS Administration Regulations 2000(7)
commenced on 1 September 2000.(8) The Regulations define key
statutory expressions and specify the processes that must be followed
to obtain ACIS benefits.
These regulations relate mainly to definitions under
section 6 of the Act and describe the kinds of plant and equipment and
research and development which will be approved under ACIS. On the repeal
of section 6 of the Act when this Bill passes the normal effect would
be that the regulations relying on section 6 would also be repealed.
It is clear that a key objective of the proposed amendments
is to allow for the formulation of regulations that will allow the administrators
of ACIS to exercise control over not only the kind but also the level
of expenditure on plant and equipment and research and development that
is allowable. This will be possible by specifying in regulations under
the amended Act the maximum claimable value of allowable plant
and equipment and allowable research and development.
A major concern with this type of assistance package
is its administrative complexity. The Government has noted that ACIS will
involve higher administrative costs to Government and higher compliance
costs to industry than the existing motor vehicle assistance arrangements.
The Scheme needs to be delivered through an administrative
framework which:
- clearly identifies which investments and innovations will be eligible
for investment,
- ensures the cap on the cost of ACIS is achieved,
- minimises the administrative burden on both participants and the Government,
and
- is sufficiently transparent to allow proper accountability.
This is a tough order as there is clearly potential for
conflict between the achievement of each of the above four objectives.
Most of the proposed amendments relate to the regulations
that can be used under the legislation to define and quantify which expenditures
will be eligible for inclusion in the calculation of benefits under ACIS.
The proposed changes will increase the powers of the regulator to control
the distribution of benefits from the Scheme. In particular, with respect
to what is approved plant and equipment and what is approved research
and development, the amendments expand the scope of the regulations to
specify not only which items are allowable but also the maximum claimable
value in respect of allowable plant and equipment or research and development.
The proposed expansion of the regulatory powers would
appear to be of clear benefit to the regulator in that it provides scope
for greater control over the cost of the program and for the prevention
of potential abuse. The Minister notes in his Second Reading Speech that
the changes will assist participants to determine what is and is not eligible
expenditure-this is an important aspect.(9) The Minister's
further claim that the amendments will streamline the operation of the
scheme and reduce the administrative burden on both participants and the
Government appears more open to challenge.(10) Increased regulation
can often have the opposite effect and add to administrative burden. The
outcome will depend on the skill of the regulator and the administrator
in containing the administrative burden.
Finally, with respect to the proposed amendment to protect
the Scheme from 'artificial' companies, this is clearly desirable as long
as it is not used to block 'genuine' new entrants to the industry. A competitive,
sustainable industry will require the entry of new companies, particularly
in components and parts production. It is important that innovative new
entrants are encouraged, irrespective of the opposition to such entry
expressed by existing participants in ACIS.
- Senate Hansard, 6 September 2000, p. 17381.
- A 'person' includes bodies corporate as well as individuals: Acts
Interpretation Act 1901, s 22(1)(a).
- 'Eligible investments' are type A, B or C in relation to a MVP, types
D or E investments in relation to an ACP, types F or G in relation to
an AMTP and types H or I in relation to an ASP (section 6 of the Act).
- Where a body corporate is: a holding company of another body corporate;
a subsidiary of another body corporate; or a subsidiary of a holding
company of another body corporate; the first-mentioned body and the
other body are related to each other.
- Section 3 states that the purpose is to provide transitional assistance
to encourage competitive investment and innovation in the automotive
industry 'in order to achieve sustainable growth, both in the Australian
market and internationally, in the context of trade liberalisation'.
- Explanatory Memorandum, p. 6.
- Statutory Rules 2000 No. 243.
- Regulation 2.
- Senate Hansard, 6 September 2000, p. 17381.
- ibid.
Diane Spooner and Michael Emmery
9 October 2000
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ISSN 1328-8091
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