Explanatory Memorandum
(Circulated by the authority of Senator the Honourable John N Button, Minister for Industry, Technology and Commerce).OUTLINE
1 The purpose of this Bill is to amend the Income Tax Assessment Act 1936 and the Industry Research and Development Act 1986 to increase the effectiveness of the 150% tax concession in stimulating investment in research and development (R & D) by industry in Australia and ensure that Australia obtains a proper return on revenue-subsidised R & D.
2 The Bill will increase the efficiency of administration of the concession by transferring to the IR & D Act those powers and functions of the Industry Research and Development Board (the Board) which are at present provided for in the Income Tax Assessment Act.
3 This Bill will implement a number of the proposals announced by the Treasurer and the Minister for Industry, Technology and Commerce on 20 November 1987.
4 To reduce the incidence of companies being required to reimburse tax benefits subsequent to a tax audit, the Bill empowers the Board to refuse to register a company if the activities cited in the application for registration are not R & D activities or for such other specified reasons as may be within the Board's authority to determine.
5 The Board's powers are to be broadened so as to ensure that large claims may not be made for projects which have an insufficient Australian content. The Bill also tightens up existing provisions which are designed to enable the Board to cause the loss of tax benefits where a company fails, in any significant way, to exploit the results of revenue subsidised R & D on normal commercial terms and to the benefit of the Australian economy.
6 The circumstances in which access to the tax concession is available for contracted expenditure incurred by companies whose annual R & D expenditure is less than $50 000 will be extended. For the purposes of the tax concession, the Bill establishes a new category of research body, the Registered Research Agency (RRA) to replace Approved Research Institutes. RRAs will be registered by the Board and will not be limited to non-profit organisations.
7 To encourage investment in projects of R & D which are too big or too risky to be advanced solely by those with the ability to directly use the results, the Bill will enable the Board to provide prior "in principle" approval and subsequently to jointly register participating companies. Companies registered in this manner will be assured of their entitlements to the tax concession unless they depart from the terms of the venture as approved.