Dr EMERSON (Minister for Small Business, Independent Contractors and the Service Economy, Minister Assisting the Finance Minister on Deregulation and Minister for Competition Policy and Consumer Affairs) (9:12 AM) —I move:

This bill supports the Tax Laws Amendment (Research and Development) Bill 2010, which introduces a new research and development tax incentive to replace the outdated and complex R&D tax concession.

Together the bills clarify the treatment of government grants under the new R&D tax incentive.

Where an entity’s research and development expenditure eligible for an R&D tax offset is funded from a government grant or recouped from government, the potential double benefit is clawed back.

This is achieved by the entity paying an additional amount of income tax equal to 10 per cent of the relevant grant or recoupment amount. This form of adjustment is much easier for taxpayers and administrators than current arrangements because it avoids the need to recalculate tax offset entitlements for previous years.

This bill contains the necessary amendments to the Income Tax Rates Act 1986, which in accordance with normal government practice are contained in a bill separate from the other amendments.

Full details of the amendments in this bill are contained in the combined explanatory memorandum to this bill and the Tax Laws Amendment (Research and Development) Bill.

Debate (on motion by Mr Coulton) adjourned.