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Tax Laws Amendment (Research and Development) Bill 2011

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2010-2011

 

The Parliament of the

Commonwealth of Australia

 

THE SENATE

 

 

 

Tax Laws Amendment (Research and Development) Bill 2010

 

 

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

[quarterly credits]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

(8)     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.

[quarterly credits]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]

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

[when provisions start to apply]



 

 

Parliamentary Counsel

Tax Laws Amendment (Research and Development) Bill 2010

CJ260

Statement of reasons: why certain amendments should be moved as requests

Section 53 of the Constitution is as follows:

Powers of the Houses in respect of legislation

53. Proposed laws appropriating revenue or moneys, or imposing taxation, shall not originate in the Senate. But a proposed law shall not be taken to appropriate revenue or moneys, or to impose taxation, by reason only of its containing provisions for the imposition or appropriation of fines or other pecuniary penalties, or for the demand or payment or appropriation of fees for licences, or fees for services under the proposed law.

The Senate may not amend proposed laws imposing taxation, or proposed laws appropriating revenue or moneys for the ordinary annual services of the Government.

The Senate may not amend any proposed law so as to increase any proposed charge or burden on the people.

The Senate may at any stage return to the House of Representatives any proposed law which the Senate may not amend, requesting, by message, the omission or amendment of any items or provisions therein. And the House of Representatives may, if it thinks fit, make any of such omissions or amendments, with or without modifications.

Except as provided in this section, the Senate shall have equal power with the House of Representatives in respect of all proposed laws.

Amendment (8)

The effect of this amendment is to allow the making of regulations that may increase the amount of expenditure payable out of the Consolidated Revenue Fund under the standing appropriation in section 16 of the Taxation Administration Act 1953 . It is covered by section 53 because it may increase a “proposed charge or burden on the people”.

Consequential amendments

The following amendment(s) are consequential on the amendments mentioned above:

amendment (1).



 

 

 

Tax Laws Amendment (Research and Development) Bill 2010 SHEET CJ260

 

 

 

Statement by the Clerk of the Senate pursuant to the order of

the Senate of 26 June 2000

 

 

 



Amendment no. 8 would not be regarded as a request under the precedents of the Senate.

 

The effect of amendment no. 8 is to provide for the making of regulations which have the effect of changing the timing of the delivery of the research and development incentive to certain entities, through the introduction of quarterly tax credits.

 

The Senate has long held the view that only a very direct effect on an appropriation is regarded as an increase in a charge or burden ( Odgers’ Australian Senate Practice , 12 th edition, page 296). Possible expenditure from the standing appropriation in the Taxation Administration Act 1953 on the basis of regulations being made which do not “clearly, necessarily and directly” affect that appropriation does not meet the test of directness.

 

Amendment no. 1, which is consequential on amendment no. 8, should be treated similarly by the Senate.