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TAX LAWS AMENDMENT (RESEARCH AND DEVELOPMENT) BILL 2010E INCOME TAX RATES AMENDMENT (RESEARCH AND DEVELOPMENT) BILL 2010

Order of the day read for the adjourned debate on the motion of the Parliamentary Secretary for Defence (Senator Feeney)—That these bills be now read a second time.

Debate resumed.

Question put and passed.

Bills read a second time.

The Senate resolved itself into committee for the consideration of the bills.

In the committee

TAX LAWS AMENDMENT (RESEARCH AND DEVELOPMENT) BILL 2010—

Bill taken as a whole by leave.


Explanatory memorandum: The Minister for Innovation, Industry, Science and Research (Senator Carr) tabled a supplementary explanatory memorandum relating to the government amendments and requests for amendments to be moved to the bills.

Statement by Chair of Committees: The Chair of Committees (Senator Parry) made a statement indicating that as the Government amendment inserting Schedule 3A, circulated as a request, did not have a direct effect on an appropriation, it could not be regarded as an increase in a charge or burden on the people with the meaning of section 53 of the Constitution. Under the precedents of the Senate, it should therefore not be moved as a request and would be treated as an amendment.

Senator Colbeck moved the following amendments together by leave:

 Clause 3, page 2 (table), omit the table (but not the note), substitute:

Commencement information

Column 1Column 2Column 3

Provision(s)CommencementDate/Details

1. Sections 1 to 3 and anything in this Act not elsewhere covered by this tableThe day this Act receives the Royal Assent.

2. Schedules 1, 2, 3 and 41 July 2011.

Schedule 1, item 1, page 12 (line 11), omit "1 July 2010", substitute "1 July 2011".

Schedule 1, item 1, page 12 (line 13), omit "1 July 2010", substitute "1 July 2011".

Schedule 1, item 1, page 29 (line 31), omit "1 July 2010", substitute "1 July 2011".

Schedule 1, item 1, page 29 (line 33), omit "1 July 2010", substitute "1 July 2011".

Schedule 1, item 1, page 38 (line 21), omit "1 July 2010", substitute "1 July 2011".

Schedule 1, item 1, page 38 (line 23), omit "1 July 2010", substitute "1 July 2011".

Schedule 3, page 99 (line 2), omit the Division heading.

Schedule 3, item 42, page 99 (lines 6 and 7), omit the note.

Schedule 4, item 1, page 112 (line 7), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 1, page 112 (lines 9 and 10), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 1, page 112 (line 14), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 1, page 112 (lines 15 and 16), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 1, page 112 (lines 18 and 19), omit "1 July 2010", substitute "1 July 2011".


Schedule 4, item 1, page 112 (line 21), omit "2010-11", substitute "2011-12".

Schedule 4, item 3, page 113 (line 29), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 113 (line 31), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 113 (line 34), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 113 (line 35), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 113 (line 38), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 114 (line 2), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 114 (line 15), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 114 (line 18), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 114 (line 21), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 3, page 114 (line 23), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 8, page 116 (line 10), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 12, page 118 (line 6), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 12, page 120 (line 21), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 14, page 123 (line 13), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 124 (line 18), omit "2010-11", substitute "2011-12".

Schedule 4, item 15, page 124 (line 24), omit "2010-11", substitute "2011-12".

Schedule 4, item 15, page 124 (line 27), omit "2010-11", substitute "2011-12".

Schedule 4, item 15, page 124 (line 28), omit "2010-11", substitute "2011-12".

Schedule 4, item 15, page 125 (line 17), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 128 (line 22), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 132 (line 10), omit "2010-11", substitute "2011-12".

Schedule 4, item 15, page 132 (line 12), omit "2010-11", substitute "2011-12".

Schedule 4, item 15, page 132 (line 17), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 132 (line 27), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 132 (line 33), omit "1 July 2010", substitute "1 July 2011".


Schedule 4, item 15, page 133 (line 6), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 133 (line 24), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 133 (lines 29 and 30), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 134 (line 16), omit "1 July 2010", substitute "1 July 2011".

Schedule 4, item 15, page 134 (line 25), omit "1 July 2010", substitute "1 July 2011".

Debate ensued.

Question—That the amendments be agreed to—put and negatived.

Question—That the bill be agreed to—divided, at the request of Senator Colbeck, in respect of Schedule 3, Division 2.

Schedule 3, Division 2 debated and agreed to.

On the motion of Senator Carr the following amendments, taken together by leave, were agreed to:

 Schedule 1, item 1, page 12 (line 11), omit "1 July 2010", substitute "1 July 2011".

 Schedule 1, item 1, page 12 (line 13), omit "1 July 2010", substitute "1 July 2011".

 Schedule 1, item 1, page 29 (line 31), omit "1 July 2010", substitute "1 July 2011".

 Schedule 1, item 1, page 29 (line 33), omit "1 July 2010", substitute "1 July 2011".

 Schedule 1, item 1, page 38 (line 21), omit "1 July 2010", substitute "1 July 2011".

 Schedule 1, item 1, page 38 (line 23), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 1, page 112 (line 7), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 1, page 112 (lines 9 and 10), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 1, page 112 (line 14), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 1, page 112 (lines 15 and 16), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 1, page 112 (lines 18 and 19), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 1, page 112 (line 21), omit "2010-11", substitute "2011-12".

 Schedule 4, item 3, page 113 (line 29), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 3, page 113 (line 31), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 3, page 113 (line 34), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 3, page 113 (line 35), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 3, page 113 (line 38), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 3, page 114 (line 2), omit "1 July 2010", substitute "1 July 2011".


 Schedule 4, item 3, page 114 (line 15), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 3, page 114 (line 18), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 3, page 114 (line 21), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 3, page 114 (line 23), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 8, page 116 (line 10), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 12, page 118 (line 6), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 12, page 120 (line 21), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 14, page 123 (line 13), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 124 (line 24), omit "2010-11", substitute "2011-12".

 Schedule 4, item 15, page 124 (line 28), omit "2010-11", substitute "2011-12".

 Schedule 4, item 15, page 125 (line 17), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 128 (line 22), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 132 (line 12), omit "2010-11", substitute "2011-12".

 Schedule 4, item 15, page 132 (line 17), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 132 (line 27), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 132 (line 33), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 133 (line 6), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 133 (line 24), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 133 (lines 29 and 30), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 134 (line 16), omit "1 July 2010", substitute "1 July 2011".

 Schedule 4, item 15, page 134 (line 25), omit "1 July 2010", substitute "1 July 2011".


Senator Colbeck moved the following amendment:

 Schedule 1, item 1, page 5 (lines 12 to 23), omit section 355-5, substitute:

  

355-5 Object

  (1) The object of this Division is to increase the number of businesses that conduct research and development activities and to increase the level of such activities that individual businesses conduct, where this is likely to benefit the Australian economy.

  (2) This object is to be achieved by providing a tax incentive forindustry to conduct, in a scientific way:

 (a) research activities forthe purpose of generating new knowledge or information in either abasic or applied form; or

 (b) experimental development activities to developnew or improved materials, products, devices, processes orservices;

   that, if successful, may be able to be commercialised for the benefit of the Australian economy.

Debate ensued.

Question—That the amendment be agreed to—put and negatived.

Senator Colbeck moved the following requests for amendments together by leave:

 That the House of Representatives be requested to make the following amendments:

 Schedule 1, item 1, page 7 (line 14), omit "(1)".

 Schedule 1, item 1, page 7 (lines 16 to 21), subsection 355-30(2), omit the subsection.

Question—That the requests be agreed to—put and negatived.

Senator Colbeck moved the following requests for amendments together by leave:

 That the House of Representatives be requested to make the following amendments:

 Schedule 1, item 1, page 8 (table item 1), after "apply)", insert "where, in calculating aggregate turnover, references in section 328-125 to at least 40% are read as references to greater than 50%".

 Schedule 1, item 1, page 9 (table before line 1, table item 2), omit paragraph (a), substitute:

(a) references in section 328-125 to at least 40% were references to greater than 50%; and

Debate ensued.

Question—That the requests be agreed to—put and negatived.

Senator Colbeck moved the following request for an amendment:

 That the House of Representatives be requested to make the following amendment:

 Schedule 1, item 1, page 15 (lines 27 to 29), omit paragraph 355-225(1)(a), substitute:

 (a) expenditure of a capital nature that is incurred to acquire or construct:

 (i) a building or a part of a building; or

 (ii) an extension, alteration or improvement to a building;


  that is to be *held by the R&D entity;

Question—That the request be agreed to—put and negatived.

Senator Colbeck moved the following request for an amendment:

 That the House of Representatives be requested to make the following amendment:

 Schedule 1, item 1, page 21 (line 8) to page 22 (line 4), section 355-405, omit the section.

Question—That the request be agreed to—put and negatived.

Senator Colbeck moved the following amendments together by leave:

 Schedule 1, item 1, page 22 (line 36), omit "only".

 Schedule 1, item 1, page 23 (line 4), omit "only".

 Schedule 1, item 1, page 23 (line 9), omit "otherwise", substitute "if neither of paragraphs (a) and (b) apply".

 Schedule 4, item 15, page 131 (table, after line 31), insert:

355-410 Disposal of results of R&D activities under old Act

 Schedule 4, item 15, page 131 (after line 32), before section 355-415, insert:

  

355-410 Disposal of results of R&D activities under old Act

   If an R&D entity under the Income Tax Assessment Act 1997 (the new Act) made claims under the formersection 73B of the Income Tax Assessment Act 1936 (the old Act) in relation to R&D activities under the old Act, then section 355-410 of the new Act applies in relation to the results of those activities as if they were R&D activities for the new Act.

Debate ensued.

Question—That the amendments be agreed to—put and negatived.

Senator Colbeck moved the following amendments together by leave:

 Schedule 1, item 1, page 27 (line 6) to page 29 (line 7), omit Subdivision 355-H, substitute:

  

Subdivision 355-H—Feedstock adjustments

Table of sections

355-460 What this Subdivision is about

355-465 Feedstock adjustment to R&D expenditure

355-470 Experimental production activity

355-475 Application to connected entities and affiliates

 

355-460 What this Subdivision is about

Where an R&D activity that is an experimental production activity produces product held for sale, applied to own use or further processing, then the value of the tax offset for that R&D activity is reduced by the lower of:

 (a) the expenditure on feedstock goods, materials and energy that are transformed or processed into the stock or assets; and

 (b) the value of the feedstock output produced by the R&D activity.

 


355-465 Feedstock adjustment to R&D expenditure

  (1) This section applies to an *R&D entity and an *experimental production activity for an income year if:

 (a) the entity incurs expenditure in the income year in acquiring or producing feedstock inputs for the *experimental production activity; and

 (b)  the entity obtains under section 355-100 *tax offsets for one or more income years for deductions under this Division in relation to the *experimental production activity:

 (i) for expenditure on feedstock inputs for the *experimental production activity; or

 (ii) for expenditure it incurs on any energy input directly into the transformation or processing of such feedstock inputs; and

 (c) the entity recovers value in the income year from feedstock outputs of the *experimental production activity by:

 (i) sale of the feedstock outputs; or

 (ii) using them as feedstock inputs into further processing or transformation; or

 (iii) applying them to its own use.

  (2) The expenditure eligible for the *tax offset under section 355-100 for the *experimental production activity is reduced in the income year by the lesser of:

 (a) the total expenditure giving rise to the deductions mentioned in paragraph (1)(b), apart from expenditure that has already been used under this paragraph; and

 (b) the value recovered under paragraph (1)(c), worked out as follows:

 (i) if the feedstock output is sold in that year without further transformation or processing after the *experimental production activity, then the value is the consideration received for the goods or materials produced by this *experimental production activity;

 (ii) otherwise, the value is the market value of the feedstock output at the first point it is able to be valued after the completion of the *experimental production activity.

  (3) For this section, feedstock inputs are goods or materials that are transformed or processed during an *experimental production activity into one or more tangible products (the feedstock outputs).

   

355-470 Experimental production activity

  (1) An experimental production activity is the collection of all the necessary *R&D activities needed to be carried out to achieve the objective of a production trial, except for those activities that are only to acquire or produce feedstock inputs.

  (2) An *experimental production activity includes all *R&D activities required to undertake the trial and produce the feedstock outputs to the point that these can reasonably be valued as finished goods or materials or intermediate goods or materials to be further processed or transformed in activities after the production trial.

   


355-475 Application to connected entities and affiliates

   This Subdivision applies to a *supply or use of the marketable product by:

 (a) an entity *connected with the *R&D entity; or

 (b) an *affiliate of the R&D entity or an entity of which the R&D entity is an affiliate;

   as if it were by the R&D entity.

 Schedule 1, item 4, page 43 (line 30), omit the definition of feedstock revenue, substitute:

   experimental production activity has the meaning given by section 355-470.

Debate ensued.

Question—That the amendments be agreed to—put and negatived.

Senator Colbeck moved the following amendments together by leave:

 Schedule 2, item 1, page 47 (line 3) to page 48 (line 31), omit sections 27A and 27B, substitute:

  

27A Registering R&D entities for R&D activities

  (1) The Board must, on application by an R&D entity, decide whether to register or refuse to register the entity for one or more specified R&D activities for an income year.

   Note 1: A decision under this subsection is reviewable (see Division 5).

   Note 2: For requirements of applications, see section 27D.

  (2) If the Board decides under subsection (1) to register the R&D entity, the Board must do so consistently with:

 (a) any findings already in force under subsection 27B(1) in relation to the application; and

 (b) any findings already in force under subsection 28A(1) (advance findings about the nature of activities) in relation to the R&D entity.

 

27B Findings about applications for registration

  (1) The Board may make one or more findings in relation to an R&D entity's application for the purposes of subsection 27A(1) to the effect that all or part of the activities satisfy the definition of R&D activities in section 355-20 of the Income Tax Assessment Act 1997.

   Note: A finding is reviewable (see Division 5).

  (2) If the Board makes a finding under subsection (1) in relation to the R&D entity's registration, the Board may specify in the finding the times to which the finding relates.

   Example: A finding under subsection (1) could specify the times during the registration year that a registered activity was an R&D activity.

  (3) This section has effect subject to section 32B (findings cannot be inconsistent with any earlier findings).


 Schedule 2, item 1, page 52 (lines 3 to 37), omit section 27J, substitute:

  

27J Findings about a registration

  (1) The Board may make one or more findings about an R&D entity's registration under section 27A for an income year to the effect that all or part of the activities satisfy the definition of R&D activities in section 355-20 of the Income Tax Assessment Act 1997.

   Note: A finding is reviewable (see Division 5).

  (2) If the Board makes a finding under subsection (1) in relation to the R&D entity's registration, the Board may specify in the finding the times to which the finding relates.

   Example: A finding under subsection (1) could specify the times during the registration year that a registered activity was an R&D activity.

  (3) This section has effect subject to section 32B (findings cannot be inconsistent with any earlier findings).

 Schedule 2, item 1, page 56 (line 20) to page 57 (line 3), omit subsection 28A(1), substitute:

 (1) The Board must, on application by an R&D entity for a finding under this subsection about an activity, either:

 (a) find that all or part of the activity satisfies the definition of R&D activities in section 355-20 of the Income Tax Assessment Act 1997 for which the entity has been or could be registered under section 27A for an income year; or

 (b) find that all or part of the activity does not satisfy the definition of R&D activities in section 355-20 of the Income Tax Assessment Act 1997 for which the entity has been or could be registered under section 27A for an income year.

Debate ensued.

Question—That the amendments be agreed to—put and negatived.

Senator Carr moved the following amendments together by leave:

 Clause 2, page 2 (table item 7), omit "Schedule 4", substitute "Schedules 3A and 4".

 Page 111 (after line 24), after Schedule 3, insert:

  

Schedule 3A—Quarterly credits

 

Part 1—Introduction

 1 Definitions

  (1) In this Schedule:

  net refund assessment position: an entity is in a net refund assessment position for an income year if:

 (a) an excess remains after the entity's tax offsets for the income year are applied against its basic income tax liability for the income year; and

 (b) that excess is wholly or partly refundable.

Note: The excess will be wholly or partly refundable if some or all of the tax offsets are refundable tax offsets.

  quarterly credit means a credit referred to in item 3.


refundable R&D tax offset: an entity is entitled to a refundable R&D tax offset for an income year if:

 (a) the entity is an R&D entity that is entitled under section 355-100 of the Income Tax Assessment Act 1997 to a tax offset for the income year; and

 (b) that tax offset is a refundable tax offset.

  refundable tax offset means a tax offset that is subject to the refundable tax offset rules.

relevant Acts means the following Acts:

 (a) the Income Tax Assessment Act 1936;

 (b) the Income Tax Assessment Act 1997;

 (c) the Industry Research and Development Act 1986;

 (d) the Taxation Administration Act 1953.

  total credits: an entity's total credits for an income year is an amount equal to the sum of the entity's quarterly credits for the income year.

  (2) Subject to subitem (1), an expression used in this Schedule that is also used in the Income Tax Assessment Act 1997 has the same meaning in this Schedule as it has in that Act.

  

Part 2—Power to make regulations to modify operation of Acts

 2 Regulations may modify operation of Acts to allow quarterly credits

  (1) The Governor-General may make regulations modifying the operation of one or more of the relevant Acts for the purpose of achieving the objectives set out in this Part. The regulations have effect accordingly.

 (2) The Minister must recommend to the Governor-General that the Governor-General make regulations under subitem (1) before 1 January 2014.

 3 First objective—quarterly credits in anticipation of refundable tax offset

  (1) The first objective is that an R&D entity will be credited by the Commissioner quarterly amounts for an income year if particular requirements are satisfied.

Note 1: These requirements include the R&D entity satisfying eligibility criteria and other matters (for example, see Part 3).

Note 2: Receiving quarterly credits may result in the R&D entity being paid an amount out of the Consolidated Revenue Fund (see section 16 of the Taxation Administration Act 1953 ).

  (2) Three of the eligibility criteria for a quarterly credit for an income year are:

 (a) that it is reasonable to expect that the R&D entity will be entitled to a refundable R&D tax offset for the income year relating to R&D activities conducted during the income year; and

 (b) if Innovation Australia makes one or more findings about the R&D activities or purported R&D activities—that those findings are positive; and

 (c) that the quarter begins on or after 1 January 2014.

Note: There may be additional eligibility criteria (for example, see subparagraph 5(1)(a)(ii)).


 4 Second objective—tax neutral consequences

  (1) The second objective is that, as far as practicable, there be tax-neutral consequences for an R&D entity receiving quarterly credits.

Note 1: This objective is for the R&D entity to be in the same position, for income tax purposes, whether:

   (a) the R&D entity receives quarterly credits for an income year; or

   (b) the R&D entity does not receive those quarterly credits, and becomes entitled, after the end of the income year, to the refundable R&D tax offset for the income year.

Note 2: Achieving this objective could include providing for a reconciliation and other integrity measures (for example, see paragraphs 5(1)(l) and (p) and subitem 5(4)).

  (2) For the purposes of subitem (1), disregard consequences relating to time.

  

Part 3—Modified Acts may provide for certain matters

 5 Some matters the modified Acts may provide for

  (1) As a result of the regulations, the collective operation of the relevant Acts may provide for any or all of the following matters:

 (a) eligibility criteria for quarterly credits, including:

 (i) matters relevant to working out when paragraph 3(2)(b) is satisfied; and

 (ii) additional criteria to those mentioned in subitem 3(2);

 (b) how applications for quarterly credits may be made, including that:

 (i) applications must be in an approved form; and

 (ii) applications may be varied;

 (c) that Innovation Australia may make findings (the IA findings) about the activities that relate to an application, or proposed application, for quarterly credits;

 (d) how IA findings may be made, including that IA findings may be made on application in an approved form;

 (e) fees relating to applications for quarterly credits or applications for IA findings, and a method for indexing the fees;

 (f) how applications for quarterly credits or IA findings are considered (and approved or rejected);

 (g) that applicants for quarterly credits or IA findings are notified of specified decisions or matters;

 (h) that further information may be requested from applicants for quarterly credits or IA findings;

 (i) deadlines for doing things in relation to quarterly credits or the making of IA findings;

 (j) how amounts of quarterly credits are worked out;

 (k) that each quarterly credit is a credit the R&D entity is entitled to under a taxation law for the purposes of Part IIB of the Taxation Administration Act 1953;

 (l) that an R&D entity's total credits for an income year become a debt due to the Commonwealth at a specified time after the end of the income year;

 (m) that each of the following may be varied or revoked:

 (i) an approval of an application for quarterly credits;


 (ii) an IA finding;

 (n) that internal review may be sought of specified decisions relating to quarterly credits or the making of IA findings;

 (o) that review by the Administrative Appeals Tribunal may be sought of internal review decisions relating to quarterly credits or the making of IA findings;

 (p) integrity measures;

 (q) that specified findings, decisions or requests made by Innovation Australia relating to quarterly credits are binding on the Commissioner (or vice versa);

 (r) that Innovation Australia is authorised to disclose to the Commissioner (or vice versa) information relating to quarterly credits or the making of IA findings;

 (s) matters of a transitional, application or saving nature;

 (t) matters of a consequential, ancillary or incidental nature.

Note 1: Innovation Australia's findings (see paragraph (c)) could be made before, during or after the consideration of an application for quarterly credits.

Note 2: Innovation Australia could make decisions on its own initiative or on application. For example, Innovation Australia could make a finding, or vary a finding or an approval, on its own initiative.

  (2) Without limiting paragraph (1)(a), examples of additional eligibility criteria include the following:

 (a) that it is reasonable to expect that the R&D entity will be in a net refund assessment position for the income year;

 (b) that the R&D entity has been assessed as being entitled under section 355-100 of the Income Tax Assessment Act 1997 to a tax offset (whether a refundable tax offset or not) for an earlier income year.

  (3) Fees referred to in paragraph (1)(e) must not be such as to amount to taxation.

 (4) Without limiting paragraph (1)(p), examples of integrity measures include the following:

 (a) if an R&D entity's total credits for an income year exceeds the amount of the R&D entity's entitlement to a refundable R&D tax offset for the income year—that the R&D entity may be liable to pay a penalty on the excess;

 (b) if the approval of an R&D entity's application for quarterly credits for an income year is revoked—that the R&D entity's total credits for the income year become a debt due to the Commonwealth at a specified time.

  (5) As a result of the regulations, the collective operation of the relevant Acts may provide that a disclosure referred to in paragraph (1)(r) may be made despite:

 (a) subsection 47(1) of the Industry Research and Development Act 1986; and

 (b) sections 355-25, 355-155 and 355-265 in Schedule 1 to the Taxation Administration Act 1953.

 
(6) This item does not limit item 2.

 6 Other matters the modified Acts may provide for

  (1) As a result of the regulations, the collective operation of the relevant Acts may make different provision for a matter for different kinds of entities.

Note: For example, different provision could be made for members of consolidated groups or MEC groups.

  (2) As a result of the regulations, the collective operation of the relevant Acts may make provision for a matter by:

 (a) empowering a person to make a decision of an administrative character; and

 (b) if appropriate, requiring the person to make that decision in accordance with decision-making principles.

  Any decision-making principles must be legislative instruments.

  (3) This item does not limit item 2.

  

Part 4—Alternative constitutional basis

 7 Alternative constitutional basis

  (1) Without limiting its effect apart from this subitem, the modified operation of each relevant Act as a result of the regulations has the effect it would have if:

 (a) subitem (2) had not been enacted; and

 (b) the relevant Act applied so that quarterly credits could only be worked out for an R&D entity that:

 (i) is a constitutional corporation; or

 (ii) has its registered office (within the meaning of the Corporations Act 2001) or principal place of business (within the meaning of that Act) located in a Territory.

  (2) Without limiting its effect apart from this subitem, the modified operation of each relevant Act as a result of the regulations has the effect it would have if:

 (a) subitem (1) had not been enacted; and

 (b) the relevant Act applied so that quarterly credits could only be worked out in respect of activities, or parts of activities, conducted or to be conducted:

 (i) solely in a Territory; or

 (ii) solely outside of Australia; or

 (iii) solely in a Territory and outside of Australia; or

 (iv) for the dominant purpose of supporting core R&D activities conducted, or to be conducted, solely in a Territory.

 

Part 5—Other matters

 8 Varying the regulations

  The Governor-General may vary, in accordance with subsection 33(3) of the Acts Interpretation Act 1901, regulations made under item 2. However, the Governor-General must not repeal those regulations.

Note: Those regulations may be varied on or after 1 January 2014.


 9 Another way of dealing with transitional, application or saving matters

  (1) The Governor-General may make regulations dealing with matters of a transitional, application or saving nature relating to the making of regulations under item 2.

Note: This is another way of dealing with these kinds of matters. These kinds of matters could also be dealt with under item 2. That is, as a result of regulations made under item 2, the collective operation of the relevant Acts could make provision for some or all of these kinds of matters (see paragraph 5(1)(s)).

  (2) Item 7 applies to regulations made under subitem (1) in a corresponding way to the way it applies to the modified operation of a relevant Act.

Debate ensued.

At 9.50 pm: The President resumed the chair and the Chair of Committees (Senator Parry) reported progress.