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Thursday, 13 May 1999
Page: 5339


Mr MOORE (Defence) (9:31 AM) —I move:

That the bill be now read a second time.

This bill, along with the ACIS (Unearned Credit Liability) Bill 1999 and the Customs Tariff Amendment (ACIS Implementation) Bill 1999, implements two key elements of the government's post-2000 arrangements for the automotive industry by:

. reducing the rates of customs duty on passenger motor vehicles and certain related componentry from 15 per cent to 10 per cent on 1 January 2005; and

. establishing the Automotive Competitiveness and Investment Scheme (ACIS) which will start on 1 January 2001.

The government announced its post-2000 arrangements for the industry on 5 June 1997 in response to the Industry Commission report on the automotive industry. The government decision recognised the significant progress this industry has made over a period of more than a decade and the need to ensure that the industry will maintain its progress in the transition towards becoming a competitive player in the global market.

On 22 April 1998 the government announced that ACIS would be the centrepiece of its post-2000 transitional arrangements for the automotive industry. The present arrangements for the automotive industry are due to finish at the end of the year 2000. In developing a new assistance package for the industry, the government was acutely aware that the central element of the new package would need to be consistent with our international obligations. ACIS represents the result of extensive policy design work, close consulta tion with industry and careful consideration of our trade obligations.

The Customs Legislation (Automotive Competitiveness and Investment Scheme) Bill 1998 to implement ACIS was introduced into parliament on 2 July 1998, but the legislation lapsed with the proroguing of parliament. Since the introduction of legislation last year:

. Customs has become part of the Attorney General's portfolio, and principal responsibility for administering ACIS now resides with the Department of Industry, Science and Resources; and

. industry has had the opportunity to provide further input to the scheme, resulting in a more rigorous legislative design and a scheme which, from an administrative standpoint, better meets industry needs.

Automotive Competitiveness and Investment Scheme

This bill provides for the establishment of the Automotive Competitiveness and Investment Scheme (ACIS). ACIS will encourage the development of internationally competitive firms in the automotive industry through rewarding eligible production, strategic investment and research and development (R&D). Within the scheme:

. Those qualifying as motor vehicle producers (MVPs) will be able to claim:

duty credit to the value of 25 per cent of the value of production of motor vehicles, engines and engine components multiplied by the tariff rate; and

duty credit to the value of 10 per cent of their investment in eligible plant and equipment.

. Those qualifying as automotive component producers, automotive machine tools and tooling producers or automotive service providers will be able to claim:

duty credit to the value of 25 per cent of their investment in eligible plant and equipment; and

duty credit to the value of 45 per cent of their investment in eligible R&D.

Where MVPs produce automotive components, automotive machine tooling or automotive services for a third party, they too can apply for these benefits. Duty credit will be fully transferable, so credit can either be used to offset customs duty on eligible imports or can be sold to a third party.

To meet Australia's World Trade Organisation obligations, benefits under ACIS for each participant will not be permitted to exceed five per cent of its eligible sales for the preceding year. Benefits under ACIS will also be capped for the industry as a whole at $2 billion over the years 2001 to 2005. The production credit which directly replaces the duty free allowance—that is, 15 per cent of value of production of passenger motor vehicles sold in Australia and New Zealand—is not included within the fiscal cap, and the revenue forgone is expected to be around $825 million over five years. The key changes embodied in the new bill include:

. focusing the scheme on the now seamless market for light vehicles under 3.5 tonnes comprising cars, four-wheel drives and light commercial vehicles;

. tightening the scheme to minimise the scope for abuse;

. including the ACIS (Unearned Credit Liability) Bill 1999 to enable any necessary adjustments to benefits;

. shifting primary responsibility for administering ACIS from the Australian Customs Service to the Department of Industry, Science and Resources in line with changes to administrative arrangement orders announced in October 1998; and

. providing officers of the department with powers to properly administer ACIS, such as audit powers.

The changes will make administration of the scheme easier to manage and more robust. The changes will also ensure that the scheme more accurately reflects current industry practice so that the industry receives the intended benefits from ACIS with the least administrative burden. The bill provides for the administrative detail for ACIS to be set out in subsidiary legislation in the form of regulations and ministerial guidelines.

Summary

This bill and the two associated bills are an integral part of the overall package of government initiatives for the automotive industry. Along with the automotive market access and development strategy, which is being oversighted by the Automotive Trade Council, the package will help position the industry as a competitive player in the global market.

The package has the support of the major industry stakeholders. They have contributed significantly to the improvements devised since the legislation was first introduced.

Each measure of the package is contingent on the success of the other, and it is essential that the integrity of the package be maintained during the passage of this and the two associated bills. I commend this bill to the House, and I present the explanatory memorandum to this bill and the next bill in the package, the ACIS (Unearned Credit Liability) Bill 1999 .

Debate (on motion by Mr Melham) adjourned.