House of Representatives

Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016

Explanatory Memorandum

(Circulated by authority of the Honourable Greg Hunt MP, the Minister for Industry, Innovation and Science)

Notes on Clauses

Preliminary

Clause 1 - Short title

This clause provides for the Bill, when enacted, to be cited as the Industry Research and Development Amendment (Innovation and Science Australia) Act 2016.

Clause 2: Commencement

This clause sets out the commencement dates for the provisions in this Bill. It provides that the whole of the Act commences the day the Bill receives Royal Assent.

Clause 3 - Schedules

This clause gives effect to the provisions in the Schedule to this Bill.

Schedule 1 - Innovation and Science Australia

Part 1-Main amendments

Industry Research and Development Act 1986

Item 1: Title

This amendment repeals the long title of the Act and replaces it with the title, 'An Act relating to industry, innovation, science and research, and for related purposes'. This amendment is to ensure the long title is consistent with the new broader object of the Industry Research and Development Act 1986 (IR & D Act) proposed by Item 2 of this Bill.

Item 2: Section 3

Section 3 of the IR & D Act sets out the object of the IR & D Act. The purpose of the amendment to section 3 is to broaden the object of the IR & D Act to facilitate the provision of independent strategic advice about investment in industry, innovation, science and research; support and encourage collaboration in the development and delivery of programs relating to industry, innovation, science and research and to permit the authorisation of Commonwealth spending on programs relating to industry, innovation, science and research. The amendment also inserts 'science activities' as an object where the purpose is the promotion of development, and improving the efficiency and international competitiveness, of Australian industry.

Item 3: Subsection 4(1)

The amendment at item 3 inserts a new definition of 'accountable authority' into subsection 4(1) of the IR & D Act. This Bill will also insert new sections 35, 36 and 37 into the IR & D Act (see below) and the definition of accountable authority is used in those sections.

Item 4: Subsection 4(1) (definition of appointed member)

The amendment at item 4 inserts the words, 'Deputy Chairperson' into the definition of 'appointed member' in subsection 4(1) of the IR & D Act. The purpose of this is to ensure that the new position of Deputy Chairperson is also an appointed member under the IR & D Act.

Item 5: Subsection 4(1) (definition of Board)

The amendment at item 5 removes the definition of 'Innovation Australia' and replaces it with 'Innovation and Science Australia' in subsection 4(1) of the IR & D Act.

Item 6: Subsection 4(1)

The amendment at item 6 inserts a new definition of 'Deputy Chairperson' into subsection 4(1) of the IR & D Act.

Item 7: Subsection 4(1) (definition of member)

The amendment to subsection 4(1) of the IR & D Act at item 7 includes the Deputy Chairperson in the definition of 'member'.

Item 8: Subsection 4(1)

The amendment at item 8 inserts new definitions of 'non-corporate Commonwealth entity' and 'official' into subsection 4(1) of the IR & D Act.

Item 9: Subsection 4(1) (definition of researcher)

The amendment at item 9 removes the definition of 'researcher' from subsection 4(1) of the IR & D Act. This amendment is related to the amendments under this Bill to subsections 4(5) and (6) and section 46 of the IR & D Act.

Item 10: Subsection 4(1) (definition of technical assessment)

The amendment at item 10 removes the definition of 'technical assessment' from subsection 4(1) of the IR & D Act. This amendment is related to the amendments under this Bill to paragraph 7(aaa) and section 18A of the IR & D Act.

Item 11: Subsections 4(5) and (6)

The amendment at item 11 removes subsections 4(5) and (6) from the IR & D Act. These amendments are related to the amendments under this Bill to sections 4 and 46 of the IR & D Act.

Item 12: At the end of section 4

The amendment at item 12 inserts a new subsection 4(9) into the IR & D Act. This new subsection defines a reference to 'research' in the IR & D Act as being a reference to research in any field. This is to ensure that 'research' wherever used in the IR & D Act is not confined to research in the fields of industry, innovation and science but extends to research in any field.

Item 13: Section 6

The amendment at item 13 removes section 6 of the IR & D Act which operated to establish 'Innovation Australia' and replaces that section with a new section 6. The new section 6 will operate so that Innovation Australia as constituted under the IR & D Act becomes 'Innovation and Science Australia' immediately on commencement of the new section 6. The new section operates in conjunction with section 25B of the Acts Interpretation Act 1901 and includes a note to that effect.

Item 14: Paragraph 7(aaa)

The amendment at item 14 removes paragraph 7(aaa) of the IR & D Act and replaces it with new paragraphs (aa), (ab), (ac) and (ad). The new paragraphs will more clearly specify the functions of the new Innovation and Science Australia.

Item 15: Paragraph 7(d)

The amendment at item 15 removes paragraph 7(d) of the IR & D Act and replaces it with new paragraph 7(d). This amendment is to ensure that any function that is incidental to, or assists with, the performance of any of the other functions of Innovation and Science Australia, should be considered functions of Innovation and Science Australia.

Item 16: Paragraph 9(1)(a)

The amendment at item 16 simply replaces the reference to 'Chairperson' with 'Chairperson; and' to enable the inclusion of the Deputy Chairperson in Innovation and Science Australia.

Item 17: After paragraph 9(1)(a)

The amendment at item 17 inserts a reference to 'Deputy Chairperson' at subparagraph (aa) so that the 'Deputy Chairperson' is included in Innovation and Science Australia.

Item 18: Paragraph 9(1)(c)

The amendment at item 18 amends paragraph 9(1)(c) by replacing the number 4 with the number 3 and replacing the number 13 with the number 12. This amendment ensures that the number of board members of Innovation and Science Australia remains the same, noting the inclusion of the new 'Deputy Chairperson' on that board.

Item 19: Subsection 9(2)

The amendment at item 19 removes the reference to 'Governor-General' and replaces this with 'Minister' in subsection 9(2) of the IR & D Act. This amendment operates to allow the Minister with administrative responsibility for the IR & D Act to appoint members to Innovation and Science Australia rather than the Governor-General. This is to reduce the regulatory burden associated with appointments made by the Governor-General.

Item 20: Subsection 9(5)

The amendment at item 20 inserts a new reference to 'Deputy Chairperson' after the reference to 'Chairperson'. This amendment is to ensure Innovation and Science Australia is able to perform its functions and exercise its powers where there is a vacancy in the position of 'Deputy Chairperson', provided the vacancy is for 6 months or a period less than 6 months.

Item 21: Subsection 9(5)

The amendment at item 21 removes the number 4 and replaces it with number 3. This amendment is related to the amendment to paragraph 9(1)(c) of the IR & D Act. This amendment addresses the need to include the Deputy Chairperson in the number of board members to be taken into account for the purpose of determining whether a vacancy affects the performance of the functions or the exercise of the powers of the Board.

Item 22: Paragraph 10(3)

The amendment at item 22 removes the reference to 'Governor-General' and replaces this with 'Minister'. This amendment is related to the amendment to subsection 9(2) of the IR & D Act under this Bill. This reflects that the Minister will have responsibility for appointing members to Innovation and Science rather than the Governor-General.

Item 23: Section 14

The amendment at item 23 removes section 14 of the IR & D Act and replaces it with a new section 14. The new section 14 operates in the same way as the repealed section 14, except that it also:

·
includes the 'Deputy Chairperson'; and
·
replaces the reference to 'Governor-General' with 'Minister'.

Item 24: Section 15

The amendment at item 24 replaces all references to 'Governor-General' with 'Minister' in section 15 of the IR & D Act. This amendment is related to the amendment to subsection 9(2) of the IR & D Act under this Bill.

Item 25: Subsection 17(1)

The amendment at item 25 replaces the words 'a member or other person' with the words, 'the Deputy Chairperson, a member or other person' in subsection 17(1) of the IR & D Act. Subsection 17(1) of the IR & D Act operates to allow ordinary members of Innovation Australia, or other persons, to be appointed to act as Chairperson (when the Chairperson position is vacant) for 12 months or periods of less than 12 months.

This amendment operates to also allow the Deputy Chairperson to be appointed to act as Chairperson (when the Chairperson position is vacant) for 12 months or periods of less than 12 months. The amended subsection 17(1) will operate in conjunction with section 33A of the Acts Interpretation Act 1901 and includes a note to that effect.

Item 26: After subsection 17(1)

The amendment at item 26 inserts a new subsection 17(1A) after subsection 17(1) of the IR & D Act. This amendment operates to allow ordinary members of Innovation and Science Australia, or other persons, to be appointed to act as Deputy Chairperson (when the Deputy Chairperson position is vacant) for 12 months or periods of less than 12 months. The new subsection 17(1A) will operate in conjunction with section 33A of the Acts Interpretation Act 1901 and includes a note to that effect.

Item 27: Subsection 18(4)

The amendment at item 27 replaces subsection 18(4) of the IR & D Act with a new subsection 18(4). The new subsection 18(4) will operate so that if the Chairperson is not present at a meeting of Innovation and Science Australia, then the Deputy Chairperson is to preside at the meeting. If the both Chairperson and the Deputy Chairperson are not present at a meeting of Innovation and Science Australia, then the members present must appoint one of their number to preside at the meeting.

Item 28: Sections 18A to 20

The amendment at item 28 removes sections 18A, 19, 19A, 19B and 20 of the IR & D Act and replaces those sections with a new section 19. This amendment will streamline a number of the Minister's powers to direct the board into one section to avoid confusion. The new subsection 19(1) will operate to allow the Minister to make notifiable instruments conferring additional functions on Innovation and Science Australia provided those functions are related to:

·
the object of the IR & D Act under section 3 of that Act;
·
the Pooled Development Funds Act 1992; or
·
the Venture Capital Act 2002.

Subsection 19(2) will provide that the Minister may give directions to Innovation and Science Australia about the performance of its functions. Directions made by the Minister to Innovation and Science Australia under this provision are notifiable instruments.

Subsection 19(3) will provide that these notifiable instruments may:

·
require Innovation and Science Australia to provide certain technical assessments to the Minister;
·
require Innovation and Science Australia to provide certain reports to the Minister;
·
set out policies and practices that are to be followed by Innovation and Science Australia when performing its functions, or exercising powers, under the IR & D Act, including with respect to any additional functions conferred.

Subsection 19(4) will limit the Minister's power under new subsection 19(2) so that the Minister cannot direct Innovation and Science Australia with respect to particular cases. That is, directions should be general in nature and apply to classes rather than specific individuals or entities.

Subsection 19(5) will provide that a Minister must not confer a function on the Board, by way of a direction under 19(1) or (2), which would allow the Board to commit or authorise the expenditure of Commonwealth money. This reflects the Board's role of providing advice rather than making decisions about Commonwealth expenditure, which are more appropriately made by the responsible Minister or accountable authority.

Subsection 19(6) will provide that the Board must comply with a direction given under section 19. This will ensure the Board is accountable to the Minister and will be required to follow any directions, including to fulfil any functions conferred, by the Minister under section 19.

Item 29: Subsections 21(1) and (2)

The amendment at item 29 replaces subsections 21(1) and (2) of the IR & D Act with a new subsection 21(1). The new subsection will allow Innovation and Science and Australia to delegate any and all of its functions to any specific member of that board, to a committee and to a member of the staff assisting that board provided they a an SES employee, or acting SES employee. This amendment removes some of the limitations that applied under the IR & D Act which prevented the Board from making delegations with respect to certain functions under the Pooled Development Funds Act 1992 and the Venture Capital Act 2002. The removal of these limitations will provide flexibility to the Board to manage its administration and oversight of these activities, and will reduce administrative burden on the Board and its committees. However, this is balanced by the limitation that a delegation by the Board to a member of the staff assisting the Board must be to an SES employee or acting SES employee, which will ensure an appropriate level of accountability for the performance of such functions. This item acts in conjunction with section 2B of the Acts Interpretation Act 1901, which provides that "SES employee" and "acting SES employee" have the same meaning as in the Public Service Act 1999.

Item 30: Subsection 22(1A)

The amendment at item 30 replaces the reference to, '21(2)' with, '21(1)' in subsection 22(1A) of the IR & D Act. This amendment is related to the amendments under this Bill to subsections 21(1) and (2) of the IR & D Act, and will reflect that delegations by the Board to a committee will be made under the new section 21(1).

Item 31: Subsection 22A(1)

The amendment at item 31 limits the committee's power to delegate any of its functions or powers to a member of staff assisting the committee to a person who is an SES employee, or acting SES employee in subsection 22A(1) of the IR & D Act. This amendment is related to the amendments under this Bill to subsections 21(1) and (2) of the IR & D Act and will ensure the committee has the same limits on its power of delegation as the board. This item acts in conjunction with section 2B of the Acts Interpretation Act 1901, which provides that "SES employee" and "acting SES employee" have the same meaning as in the Public Service Act 1999.

Item 32: Subsection 22A(1)

The amendment at item 32 replaces the reference to '21(2)' with '21(1)' in subsection 22A(1) of the IR & D Act. This amendment is related to the amendments under this Bill to subsections 21(1) and (2) of the IR & D Act and will reflect that delegations by the Board to a committee will be made under the new section 21(1).

Item 33: Subsection 22A(1A)

The amendment at item 33 removes subsection 22A(1A) of the IR & D Act. This amendment is related to the amendments under this Bill to subsections 21(1) and (2) of the IR & D Act.

Item 34: After Part III

The amendment at item 34 inserts a new Part IV into the IR & D Act including new sections 33, 34, 35, 36, 37 and 38.

33 Industry, innovation, science and research programs

The new subsection 33(1) will provide a mechanism for the Minister to prescribe programs in relation to industry, innovation, science and research by legislative instrument, including in relation to expenditure associated with those programs.

Subsection 33(2) limits the scope of the power to be conferred under the new subsection 33(1) so that it must be exercised with respect of one or more legislative powers of the Commonwealth.

Subsection 33(3) will require the legislative instruments under subsection 33(1) to specify the legislative power or powers of the Parliament in respect of which the instrument is made.

Subsection 33(4) will make provision for the matters that may be addressed in the legislative instrument.

Subsection 33(5) will provide that subsections 33(3) and (4) do not limit subsection 33(1), so that the matters that may be addressed in the legislative instrument may include matters beyond those listed in those subsections.

Subsections 33(6) and (7) will operate together so that the Minister can delegate his power under subsection 33(1) to other Ministers and such delegation can be made subject to directions with which the delegate must comply. The intention of section 33 is that these legislative instruments will provide legislative authority for expenditure related to industry, innovation, science and research programs, provided those programs are with respect to one or more legislative powers of the Commonwealth.

34 Arrangements relating to industry, innovation, science and research programs

The new subsection 34(1) will provide that the Commonwealth may make, vary or administer an arrangement in relation to activities carried out by persons under a program prescribed by legislative instrument under subsection 33(1).

Subsection 34(2) clarifies that only a Minister or an accountable authority of a non-corporate Commonwealth entity may exercise the Commonwealth's power under subsection 34(1).

Subsection 34(3) will provide new definitions for 'administer', 'arrangement', 'make' and 'vary' wherever these words are used in the new section 34. The definition of arrangement includes grants.

35 Terms and conditions relating to industry, innovation, science and research program arrangements

Subsection 35(1) will limit the arrangements made under section 34 so that, where those arrangements are with a State or Territory, the arrangement must be subject to a written agreement containing terms and conditions under which money is payable by the Commonwealth and that the State and Territory must comply with the terms and conditions. These will be the terms and conditions on the grant of the financial assistant to a State for the purposes of section 96 of the Constitution.

Subsection 35(2) will limit the arrangements made under section 34 so that, where a party to those arrangements is with a corporation to which paragraph 51(xx) of the Constitution applies, the arrangement must be subject to a written agreement containing terms and conditions under which money is payable by the Commonwealth and that the corporation must comply with the terms and conditions.

Subsection 35(3) will further limit the arrangements made under section 34 so that, where a party to those arrangements is a corporation, the terms and conditions must provide for the circumstances in which the corporation must repay amounts to the Commonwealth.

Subsection 35(4) clarifies that only a Minister or an accountable authority of a non-corporate Commonwealth entity may exercise the Commonwealth's power under subsections 35(1) and (2). Subsection 35(4) also notes that the power to enter into those agreements may be delegated under the new section 36.

Subsection 35(5) will make it clear that arrangements under section 34 between the Commonwealth and a person other than a State or Territory, or a corporation to which paragraph 51(xx) of the Constitution applies, are not prevented by section 35 from being made subject to terms and conditions.

Minister or accountable authority may delegate powers in relation to arrangements

Subsections 36(1) and (2) will operate together to provide that Ministers may delegate their powers under sections 34 or 35 to officials of any non-corporate Commonwealth entity and those officials must comply with any directions given about the exercise of that power.

Subsection 36(3) and (4) will operate together to provide that accountable authorities of a non-corporate Commonwealth entity may delegate their powers under sections 34 or 35 to officials of any non-corporate Commonwealth entity and those officials must comply with any directions given about the exercise of that power.

37 Relationship of this Part with certain other Acts

Subsection 37(1) provides that section 23 of the Public Governance, Performance and Accountability Act 2013 does not authorise the accountable authority of a non-corporate Commonwealth entity to exercise, on behalf of the Commonwealth, the power to be conferred on the Commonwealth by the new section 33 under this Bill.

Subsection 37(2) provides that the new Part IV does not by implication limit the operation of the Financial Framework (Supplementary Powers) Act 1997.

38 Executive power of the Commonwealth

Section 38 sets out that the new Part IV of the IR & D Act does not by implication limit the operation of the executive power of the Commonwealth.

The new sections under the new Part IV (33 - 38) are intended to operate in a similar way to sections 32B, 32C, 32D, 32DB and 41 under the Financial Framework (Supplementary Powers) Act 1997 respectively, but adapted to the more specific legislative instrument mechanism inserted by section 33(1).

Item 35: Paragraph 44(6)(a)

The amendment at item 35 removes the words, 'to which Ministerial directions under section 18A or 19 apply' and replaces these with the words, 'to which this Act relates' in paragraph 44(6)(a) of the IR & D Act. This amendment is related to the amendments under this Bill to sections 18A, 19, 19A, 19B and 20 of the IR & D Act. The effect of this amendment is to ensure that a person cannot be convicted of both an offence against section 135.2 of the Criminal Code and an offence against section 136.1, 137.1 or 137.2 of the Criminal Code in respect of the same application for the expenditure of Commonwealth money under a program related to this Act. This extends the effect of the previous provision to apply to programs made under the new mechanism in the new Part IV of the Act, rather than just programs to which Ministerial directions apply.

Item 36: Section 46

The amendment at item 36 removes section 46 of the IR & D Act and replaces it with a new section 46. Section 46 of the IR & D Act imposes a very detailed and particularised annual reporting requirement on Innovation Australia. The new section 46 provides a basic obligation to prepare an annual report to be given to the Minister for presentation to the Parliament. This streamlined approach will allow Innovation and Science Australia to report more effectively on its new functions (set out in Item 14 of this Bill). The new section 46 will operate in conjunction with section 34C of the Acts Interpretation Act 1901 and includes a note to that effect. The Minister will also be able to give directions to the Board under the new section 19(2) about matters to be included in the annual report.

Item 37: Subsection 47(3) (definition of protected information)

The amendment at item 37 inserts the words, 'Part III of' after the words, 'covered by' in the definition of 'protected information' at section 47(3) of the IR & D Act. This section of the IR & D Act has operated to apply a statutory confidentiality regime on sensitive taxation information being provided by individuals to Innovation Australia. As the amendments to this Bill will expand the objects of the Act and the functions of the board into areas not directly relating to taxation information, the definition of 'protected information' has been quarantined to Part III of the IR & D Act, which sets out the functions relating to the R & D tax offset program.

Item 38: Section 48A

The amendment at item 33 removes section 48A of the IR & D Act and replaces that section with a new section 48A. The new section 48A will provide that the Minister may, by legislative instrument, prescribe fees or a method of working out fees for making applications to Innovation and Science Australia under Part III, or for the purposes under the new paragraph 33(4)(e). This amendment will mean that application fees may be prescribed by legislative instrument rather than needing to be set out in regulations made by the Governor-General. It would also allow application fees to be prescribed in relation to programs created by the Minister under the new section 33(1). Subsection 48A(2) will provide that any application fees prescribed by the Minister in a legislative instrument under subsection 48A(1) must not amount to taxation.

Item 39: Application and transitional provisions

The amendments at item 39 are application and transitional provisions. Subsection 39(1) of this Bill will ensure that a person who was a member of Innovation Australia prior to the commencement of this Bill will continue to be a validly appointed member of Innovation and Science Australia. Subsection 39(2) will ensure that amendments in Part 1 of Schedule 1 of this Bill (which establishes the new Innovation and Science Australia board), will apply to appointed members of the board regardless of whether the members were appointed prior to the commencement of this Bill. Subsection 39(3) preserves the operation of directions issued by the Minister to the board under sections 18A, 19, 19B or 20 of the IR & D Act that were in force prior to commencement of this Bill.

Part 2-Consequential and other amendments

Item 40

This provision will amend the Income Tax Assessment Act 1997 to replace references to "Innovation Australia" with "Innovation and Science Australia" (including within related headings and definitions in that Act).

Items 41, 42, 44 and 45

The amendments in items 41, 42, 44 and 45 amend the relevant provisions in the IR & D Act so that, where a provision previously required a notice in writing to be published in the Commonwealth Gazette, that notice will now instead be a notifiable instrument. These amendments reflect recent changes made by the Acts and Instruments (Framework Reform) Act 2015.

Item 43

The amendment in item 43 preserves the operation of notices issued by the Minister under section 22(1) of the IR & D Act appointing committees prior to the commencement of the Bill, and prevents the need for such notices (previously published in the Commonwealth Gazette), to be re-issued as notifiable instruments.

Item 46

The amendment at item 46 preserves the operation of directions issued by Innovation Australia to a committee under section 23(1) of the IR & D Act (with respect to the matters to be taken into account by a committee in giving advice in relation to a matter or matters, or the practices to be followed by the committee in the performance of its functions), so that such notices (previously published in the Commonwealth Gazette) do not need to be re-issued as notifiable instruments.

Item 47

The amendment at item 47 replaces a reference to "Innovation Australia" in subsection 4(1) of the Pooled Development Funds Act 1992 with "Innovation and Science Australia".

Item 48

The amendment at item 48 replaces a reference to "Innovation Australia" in subsection 355-65(4) of Schedule 1 (table item 6) of the Taxation Administration Act 1953 with "Innovation and Science Australia".

Item 49

The amendments made by item 49 replace references to "Innovation Australia" in various forms wherever they occur in the Venture Capital Act 2002 with "Innovation and Science Australia".


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