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Wool Services Privatisation Bill 2000

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1998-1999-2000

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

WOOL SERVICES PRIVATISATION BILL 2000

 

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Agriculture, Fisheries and Forestry, the Hon Warren Truss MP)



CONTENTS

 

1.         General Outline                                                                                            2

2.         Abbreviations                                                                                               5

3.         Notes on clauses                                                                                           6

4.         Explanation of Schedule 1 - Amendments and Repeals                        19

 

 



Wool Services Privatisation Bill 2000

1.1               The Australian Wool Research and Promotion Organisation ( AWRAP ) is a Commonwealth statutory corporation, established under the Australian Wool Research and Promotion Organisation Act 1993 ( AWRAP Act ) .  AWRAP’s functions include undertaking the generic promotion of wool and wool products and providing funds for research and development in relation to the wool industry.  AWRAP is funded by wool tax, which is levied by the Commonwealth on sales of wool under the Wool Tax Acts (Nos 1-5) 1964 and by a ‘matching’ Commonwealth research and development contribution.  Woolgrowers who pay the wool tax do not currently hold shares or have any other proprietary interest in AWRAP.  Wool tax payers are, however, able to participate in an annual general meeting of AWRAP under special provisions contained in the AWRAP Act .

1.2               On 30 November 1998 wool tax payers passed a motion of no confidence in AWRAP at its annual general meeting.  Following this vote, the Commonwealth established a task force to enquire into the future direction of the wool industry.  The Future Directions Taskforce submitted a report (the McLachlan Report ) in June 1999.  The McLachlan Report included recommendations that AWRAP be replaced with a Corporations Law company limited by shares owned by woolgrowers.  Following the receipt of the  McLachlan Report, a voluntary woolgrower poll, known as Wool Poll 2000, was held in March 2000 to determine growers’ wishes about the appropriate future level of wool tax (if any) and the services woolgrowers wished AWRAP or its successor to provide.

1.3               On 8 August 2000 the Commonwealth announced new arrangements to apply to the Australian wool industry.  The Commonwealth announced that AWRAP would be converted from a statutory corporation into a Corporations Law company limited by shares, with shares in the new Corporations Law company to be issued to Australian woolgrowers.  The Commonwealth also announced that the converted AWRAP would have two main subsidiaries.  One of the subsidiaries would be responsible for commercial activities, including the commercial development of the Woolmark and its sub-brands and the commercialisation of intellectual property (referred to in this Explanatory Memorandum as CommercialCo ) .  The other subsidiary would manage the proceeds from the wool levy and outsource research and development and intellectual property management (referred to in this Explanatory Memorandum as R&D FundCo ) .  The announcement also foreshadowed that after a transition period, the Board of the converted AWRAP may consider the option of dissolving the converted AWRAP, leaving the two subsidiaries as separate commercial companies. 

1.4               To give effect to the Commonwealth’s announcement, this Bill provides for the privatisation of AWRAP and related matters.

1.5               Part 1, Preliminary, contains provisions dealing with the short title, commencement and application of the Bill.

1.6               Part 2, Privatisation of the Organisation, deals with the privatisation of AWRAP.  The Divisions of Part 2 are briefly described below.

1.7               Division 1, Interpretation, sets out certain definitions that apply in Part 2.

1.8               Division 2, Application for registration under the Corporations Law, provides for AWRAP to apply for registration as a Corporations Law company.

1.9               Division 3, Transfer of Assets etc, before the conversion time, allows the Minister by declaration to transfer assets, contracts and liabilities from AWRAP or a subsidiary to AWRAP or another subsidiary.  The division could be used, for example, to facilitate the separation of AWRAP’s assets, liabilities and operations between the two main subsidiaries proposed, CommercialCo and R&D FundCo.

1.10           Division 4, Registration of HoldCo as a Corporations Law company, provides for the registration by ASIC of AWRAP as a Corporations Law company.  AWRAP’s name on conversion will be Australian Wool Services Limited.  The legal entity, which is AWRAP prior to conversion and Australian Wool Services Limited after conversion, is referred to in the legislation and in this Explanatory Memorandum as ‘HoldCo’.  The conversion of AWRAP will occur on a date to be fixed by proclamation (a precise date has not been specified so as to allow a comprehensive due diligence process to be completed before privatisation) ( conversion time ) .  The effect of converting AWRAP into a Corporations Law company will be that there is no change in the legal identity of AWRAP.  This means the assets, liabilities, agreements and employees of AWRAP immediately before the conversion time will remain assets, liabilities, agreements and employees of Australian Wool Services Limited immediately after the conversion time.

1.11           Division 5, Shares in HoldCo, provides for shares in HoldCo to be issued at the conversion time in accordance with a List of Eligible Woolgrowers.  The List of Eligible Woolgrowers must be certified by the Minister as having been prepared in accordance with regulations.  It is proposed that the regulations would set out, amongst other things, the rules about eligibility for shares.

1.12           Division 6, Taxation, contains provisions designed to ensure that Commonwealth income tax and State and Territory stamp duty and other taxes do not arise in relation to certain steps to be taken as part of the AWRAP privatisation. 

1.13           Division 7, Commonwealth funding for research body, allows the Minister to declare a body to be the ‘research body’ and then enter into a contract with that research body under which the Commonwealth may pay amounts in line with wool tax or wool levy collections, together with a ‘matching’ research and development contribution, to the research body.  The initial research body could be R&D FundCo.

1.14           Division 8, Miscellaneous, deals with a variety of matters, including HoldCo’s status after conversion, the operation of the Archives Act 1983 , a Constitutional saving provision, certification, delegation and regulations.

1.15           Schedule 1 sets out amendments and repeals of a variety of Acts.  The schedule provides, amongst other things, for the repeal of the AWRAP Act .  It is also proposed that at the time AWRAP is converted into a Corporations Law company, wool tax (which is collected by the Australian Taxation Office) will cease to be imposed on transactions occurring after that time.  It is envisaged that from the conversion time a new wool levy or charge (collected by Levies and Revenue Service of the Department of Agriculture, Fisheries and Forestry) will be imposed, at the first point of sale or use in a manufacturing process, by regulations made under the Primary Industries (Excise) Levies Act 1999 and the Primary Industries (Customs) Charges Act 1999.

Financial Impact Statement

1.16           There will be a negative impact on the Commonwealth fiscal balance of $87 million and on the underlying cash balance of $9 million from converting AWRAP to a Corporations Law company.  Other Commonwealth expenditure will be borne by AWRAP under section 6(1B) of the AWRAP Act .



The following abbreviations are used in this Explanatory Memorandum:

 

ASIC

The Australian Securities and Investments Commission

AWRAP

The Australian Wool Research and Promotion Organisation

AWRAP Act

The Australian Wool Research and Promotion Organisation Act 1993

Bill

Wool Services Privatisation Bill 2000

1936 Tax Act

The Income Tax Assessment Act 1936

1997 Tax Act

The Income Tax Assessment Act 1997

wool levy

A levy or charge that is collected under the Primary Industries Levies and Charges Collection Act 1991 , that will be prescribed by regulations under this Bill.

wool tax

A tax imposed by the Wool Tax Act (No 1) 1964, Wool Tax Act (No 2) 1964, Wool Tax Act (No 3) 1964, Wool Tax Act (No 4) 1964 and Wool Tax Act (No 5) 1964

 



Part 1 - Preliminary

Clause 1 - Short Title

3.1               The Act will be called the Wool Services Privatisation Act 2000 .

Clause 2 - Commencement

3.2               The Bill (apart from Schedule 1) will commence on the day on which it receives the Royal Assent.

3.3               Schedule 1 will commence on a day to be proclaimed.  The effect of this is that the amendments and repeals of other Acts as set out in Schedule 1 will not take effect until the date of proclamation.  Also, the conversion of AWRAP into a Corporations Law company and the issue of shares will not occur until the date proclaimed.  A defined period within which proclamation must occur has not been specified in the Bill, so as to allow a comprehensive due diligence to be undertaken in relation to AWRAP before it is privatised.

Clause 3 - Schedule(s)

3.4               Clause 3 effects certain consequential amendments and repeals to other Commonwealth Acts set out in Schedule 1.  These consequential amendments and repeals will not take effect until the date of proclamation.

Clause 4 - Crown to be bound

3.5               Clause 4 provides that the Act binds the Crown in all its capacities.

Clause 5 - External Territories

3.6               Clause 5 provides for the Bill to extend to all Australian external Territories.

Clause 6 - Extraterritorial operation

3.7               Clause 6 provides for the Bill to also have effect outside Australia as well as within it.

Part 2 - Privatisation of the Organisation (HoldCo)

Division 1 - Interpretation

Clause 7 - Definitions

3.8               Clause 7 provides definitions of terms used in Part 2 of the Bill.

3.9               Two key defined terms are:

•          conversion time - which means the date on which Schedule 1 commences (ie the date of the proclamation).  This is the date on which AWRAP will be converted into a Corporations Law company and shares issued;

•          HoldCo - which prior to the conversion time means AWRAP and after the conversion time means the Corporations Law company into which AWRAP will be converted, to be called, at least initially, Australian Wool Services Limited.

Division 2 - Application for registration under the Corporations Law

Clause 8 - Application for registration

3.10           This clause requires HoldCo to apply to ASIC to register itself as a Corporations Law company as soon as possible after the commencing time, which will be on Royal Assent.  The application is to be made under Part 5B.1 of the Corporations Law, which establishes a process for a body corporate that is not a Corporations Law company to become registered as a Corporations Law company.

3.11           HoldCo is also required to lodge its proposed constitution with ASIC.  The constitution must first have been approved by the Minister.  This allows the Minister to ensure that the constitution is in a form acceptable to the Commonwealth.

3.12           Subclause 5 gives exemptions to HoldCo from certain formalities which must normally be complied with in registering a company under Part 5B of the Corporations Law.  These exemptions are:

•                      HoldCo does not have to supply details of every member (shareholder) of the company with the application;

•                      the application made by HoldCo does not need to be in the form prescribed;

•                      HoldCo does not have to lodge any documents with its application other than its proposed constitution; and

•                      HoldCo does not have to gain the consent of its members to effect the registration or prove that it is a company of the same type as the proposed type specified in the application. 

These requirements of the Corporations Law are inapplicable to AWRAP because of its current character as a statutory corporation.

Division 3 - Transfer of assets, etc before the conversion time

3.13           This Division deals with the transfer of assets, contracts and liabilities between one restructuring body and another by way of a declaration by the Minister.  A restructuring body is defined to mean HoldCo or a wholly owned subsidiary of HoldCo.  The division also deals with associated matters such as registration of transfers of land and assets other than land. 

Clause 9 - Declaration can only be made before conversion time

3.14           This clause provides that a declaration by the Minister to transfer assets, liabilities or contracts may be made only prior to the conversion time.

Clause 10 - Transfer of assets

3.15           This clause provides a mechanism to transfer an asset of one restructuring body (the transferor ) to another restructuring body (the transferee ).  It provides for the Minister to make declarations in relation to assets of a transferor that the assets vest in the transferee, including any instruments relating to those assets.  It also provides that the transferee becomes the transferor’s successor-in-law in relation to the assets (subclauses 2 and 3).  Any declarations must be published in the Gazette within 14 days (subclause 4).  Assets can be transferred in this way only before the conversion time (subclause 5).

Clause 11 - Transfer of contractual rights and obligations

3.16           This clause provides a mechanism to substitute one restructuring body (the transferee ) for another restructuring body (the transferor ) as a party to contracts.  The Minister may declare in writing that the transferor’s rights and obligations under a contract are rights and obligations of the transferee, that a contract (and instruments relating to that contract) continue to have effect as if a reference to the transferor were a reference to the transferee (subclauses 3 and 4) and that the transferee becomes the successor in law of the transferor in relation to the rights and obligations under the contract (subclause 5).  Any declarations must be published in the Gazette within 14 days (subclause 7).  Declarations under subclauses 2 and 3 can be made only before the conversion time.  This clause does not limit the operation of clauses 10 or 12 (subclause 9).

Clause 12 - Transfer of liabilities

3.17           This clause provides a mechanism to transfer a liability of one restructuring body (the transferor ) to another restructuring body (the transferee ).  It provides for the Minister to make declarations specifying that particular liabilities become liabilities of the transferee, including any instruments relating to those liabilities.  It also provides for the Minister to declare that the transferee becomes the transferor’s successor-in-law in relation to those liabilities (subclauses 2 and 3).  Any declarations must be published in the Gazette within 14 days (subclause 4).  Liabilities can be vested in a transferee only before the conversion time (subclause 5).

Clause 13 - Registration of land transfers

3.18           This clause allows for the registration of any right, title or interest in land transferred to a transferee under the provisions of clause 10.  It provides for the lodgement of an appropriate certificate signed by the Minister (subclause 1) and for a land registration official to register that transfer in accordance with the certificate (subclause 2).  The clause also provides that the Lands Acquisition Act 1989 does not apply in relation to anything done under this clause (subclause 3).

Clause 14 - Certificates in relation to assets other than land

3.19           This clause allows for the registration of an asset other than land transferred to the transferee under the provisions of clause 10.  It provides for the lodgement of an appropriate certificate signed by the Minister (subclause 1) and for an assets official to register that transfer in accordance with the certificate (subclause 2).  The clause may apply, for example, to registered patents and trade marks.

Clause 15 - Other transfer methods still available

3.20           This clause provides this Division does not prevent a restructuring body from transferring assets or liabilities (including rights or obligations under contracts) itself, without the need for a Ministerial direction under this Division.

Division 4 - Registration of HoldCo as a Corporations Law company

Clause 16 - Registration as a company under the Corporations Law

3.21           This clause requires ASIC to register HoldCo under the Corporations Law as a public company limited by shares with the name “Australian Wool Services Limited”.  This registration takes effect at the conversion time (ie the date to be set by proclamation).

3.22           Subclause 2 obliges ASIC to issue a Certificate of Incorporation and an ACN to HoldCo.

Clause 17 - Share capital

3.23           This clause provides that as soon as practical after the conversion time, the Minister must make a written declaration specifying the net worth of HoldCo immediately after the conversion time.  The amount specified is deemed to be HoldCo’s share capital immediately after the conversion time.  The declaration cannot be varied or revoked.  A copy of the declaration must be published in the Gazette .

Clause 18 - Operation of the Corporations Law after conversion time

3.24           This clause provides that after the conversion time a change in the share capital of HoldCo, the name of HoldCo or the structure, constitution or membership of HoldCo may occur in accordance with HoldCo’s constitution, the general law and the Corporations Law, in the same manner as any other company registered under the Corporations Law.

Clause 19 - Accounting records

3.25           This clause requires the accounting records maintained by HoldCo before the conversion time (ie AWRAP) to be treated as accounting records prepared or kept by HoldCo after the conversion time (ie by Australian Wool Services Limited) for the purposes of the Corporations Law.

3.26           The effects of the clause are that:

•          HoldCo is required to keep such accounting records for a period of seven years after the transactions covered by the records are completed (see section 286(2) of the Corporations Law).  HoldCo would not otherwise be required to keep those records for that time period (because the Commonwealth Authorities and Companies Act 1997 would not apply to HoldCo after the conversion time); and

•          the Directors of HoldCo will have rights of access to those accounting records by virtue of section 290 of the Corporations Law. 

3.27           Subclause (b) states that annual reports and financial statements prepared by HoldCo under the Commonwealth Authorities and Companies Act 1997 or under section 76 of the AWRAP Act are to be treated as financial reports of HoldCo for the relevant financial year.  This will allow ASIC to maintain a more complete and transparent historical record of the activities of HoldCo throughout the history of its continued existence as a single entity whether it was called AWRAP or Australian Wool Services Limited.

Division 5 - Shares in HoldCo

Clause 20 - List of Eligible Woolgrowers

3.28           This clause provides for the preparation of a List of Eligible Woolgrowers.  Before the conversion time the Minister must cause a List of Eligible Woolgrowers to be prepared (subclauses 1 and 2).  The list must show the number of shares of each class to which each person is entitled (subclause 3).  After the list has been prepared the Minister must certify that he or she is satisfied the list was prepared in accordance with regulations.  It is intended that the regulations contain eligibility rules providing that shares may be issued based on amounts of Wool Tax previously paid by persons in a specified period (subclause 4).  The Minister may certify the List even if some of the steps in the preparation of the List occurred before the relevant regulations were made (subclause 5).  After certifying the List the Minister must give HoldCo a certified copy of the List (subclause 6).

Clause 21 - Issue of shares to eligible woolgrowers

3.29           At the conversion time shares in HoldCo are taken to be issued as fully paid in accordance with the List of Eligible Woolgrowers.  If the List provides for shares to be issued to one person the shares are taken to be issued to that person.  If the list provides for the shares to be issued to two or more persons jointly, the shares are taken to be issued to those persons jointly.  For example, in the case of a partnership, shares will be taken to be issued to the members of the partnership jointly.

3.30           Subclause 2 provides that a person to whom shares are issued in this way has the same rights, privileges, benefits, duties, liabilities and obligations they would have had, had they become a shareholder under the constitution of HoldCo in the usual way.

Clause 22 - Incorrectly issued shares

3.31           This clause provides that if, within six months after conversion time, HoldCo determines, in accordance with its constitution, that any of the shares issued under clause 21 should not have been issued, then those shares are taken never to have been issued.  For example, where too many shares were issued to a person because of incorrect information provided by that person about the amount of wool tax paid by that person (which could occur innocently or because of fraud), shares in excess of a proper entitlement will be taken never to have been issued to the person.

3.32           It is also proposed that the constitution of HoldCo would allow for additional shares to be issued to a person if, for example, it is discovered that too few shares were issued to a person.

Clause 23 - Cancellation of shares in HoldCo.

3.33           This clause permits HoldCo to cancel shares in accordance with its constitution notwithstanding the statutory issuing of shares under clause 21. 

3.34           It is proposed that the Constitution of HoldCo will provide for the issue of two classes of shares in HoldCo.  The holders of A class shares would vote on matters relating to R&D FundCo and upon a demerger would receive shares in R&D FundCo.  The holders of B class shares would vote on matters relating to CommercialCo and upon a demerger would receive shares in CommercialCo.  At the conversion time each person on the List of Eligible Woolgrowers will receive both A and B class shares.  It is proposed, however, that the A class shareholders should change over time so as to comprise wool tax payers from time to time.  To enable this to occur, it is proposed that the Constitution of HoldCo would allow additional A class shares to be issued at no consideration to persons who became wool levy payers after the conversion time.  Conversely, the constitution would also allow for A class shares held by people who cease to be wool levy payers to be cancelled.  Clause 23 has been included to allow such cancellations to occur.  On the other hand, once the B class shares have been issued, it is proposed that any changes in B class shareholding occur only in the usual way under the Corporations Law (eg sale of shares, the issue of new shares or the cancelling or buying back of B class shares pursuant to the Corporations Law). 

Division 6 - Taxation

Clause 24 - Exemption from stamp duty, etc.

3.35           Subclause (1) provides that certain events (referred to as an exempt matter or anything connected with an exempt matter ) occurring under the Bill are not to give rise to stamp duty or other tax liability under any State or Territory law.  This is intended to ensure that the steps taken in the privatisation of AWRAP do not give rise to any stamp duty or other State/Territory tax liability that would not have occurred if the privatisation had not taken place.

3.36           Subclause (2) provides that the Minister may certify in writing that a specified matter is an exempt matter or is a specified thing done in connection with an exempt matter .

3.37           Subclause (3) provides that a certificate referred to in subclause (2) is, for all relevant purposes, evidence of the matter.

3.38           Essentially an exempt matter means the conversion of HoldCo, the issue of shares to woolgrowers and the ‘demerger’ of R&D FundCo and CommercialCo.  More precisely, an exempt matter is defined in subclause (4) to mean:

(a)                 the registration of HoldCo as a Corporations Law company;

(b)                the issue of Shares in HoldCo either under clause 21 or in accordance with the Constitution where the issue is certified under Clause 36 of the Bill as being related to the privatisation of HoldCo;

(c)                 the transfer of an asset or liability between two restructuring bodies, the transfer of assets, liabilities and contracts under Division 3 of the Bill, the transfer by HoldCo to a shareholder in HoldCo of any of HoldCo’s shares in a subsidiary, the issue of shares by a subsidiary of HoldCo to a shareholder in HoldCo and the cancellation of shares in HoldCo.

3.39           Each matter referred to in (c) above, must happen during the restructuring period and must be certified by the Minister under clause 36 of the Bill as being related to the privatisation of HoldCo.  The restructuring period is defined to mean the period starting on the day on which the Bill receives Royal Assent (the ‘commencing time’) and ending two years after Schedule 1 of the Bill commences (‘conversion time’).

Clause 25 - Share capital

3.40           This clause confirms that the creation of HoldCo’s share capital under clause 17 of the Bill does not cause the share capital account to become tainted under section 160ARDM of the 1936 Tax Act (which would have adverse tax consequences).

Clause 26 - No assessable income from issue of HoldCo shares

3.41           This clause confirms that the issue of shares in HoldCo as part of the privatisation is not to be treated as a receipt of assessable income in the hands of those who receive shares under either the 1936 or 1997 Tax Acts.

Clause 27 - No assessable income to arise from transfers between restructuring bodies

3.42           This clause is intended to ensure that where an asset or liability is transferred from one restructuring body to another for the purposes of the privatisation of AWRAP, no assessable income arises from those transfers.  Where a deduction arises (for example, a balancing adjustment deduction on depreciable plant), or a capital loss arises, the transferor will be entitled to that deduction, or capital loss as the case may be, subject to Subdivision 170-D of the 1997 Tax Act.

3.43           Subclause (1) provides that an exempt transfer of an asset or liability from one restructuring body to another does not result in any amount received in respect of the transfer being included in the assessable income of either the transferor or the transferee under the 1936 or 1997 Tax Acts.  This is intended to ensure that the transfer of assets, liabilities and contracts involved in the privatisation of AWRAP do not result in an income tax liability to the transferor.

3.44           Subclause (2) provides that to the extent an exempt transfer involves a CGT event for the purposes of Parts 3-1 and 3-3 of the 1997 Tax Act, the roll over concession available for transfers within a wholly owned group of companies (contained in Sub-division 126-B of the 1997 Tax Act) applies.  To ensure that the roll over concession is available, sub-clause (2):

•                      removes the requirement contained in sub-section 126-50(4) (that is, the transferee company must not be exempt from income tax during the income year in which the transfer occurs);

•                      provides that the transferor is assumed not to be exempt from income tax for the purpose of section 126-55(1)(a) (this is intended to ensure that the roll over relief is available, notwithstanding that a restructuring entity may be tax exempt); and

•                      deems the condition in sub-section 126-55(1)(b) to be met (that is, both the transferor and transferee choose to obtain the roll over).

Subclause 2 ensures that any transfer of a CGT asset under an exempt transfer will adopt the transferor’s cost base (at the time of the transfer) as the first element of its cost base.  For example, if the transferors’ cost base of an asset at the time of the transfer is $50,000, and the transferor would have made a capital gain on the transfer of the asset where it not for roll over relief (ie its market value exceeds $50,000) then the first element of the transferee’s cost base will be $50,000.

3.45           Subclause (3) provides that to the extent an exempt transfer involves the transfer of an asset that is subject to certain capital allowance provisions in the 1997 Tax Act (such as the transfer of a depreciable asset), the roll over concession available in Sub-division 41-A of the 1997 Act applies.  It does this by:

•                      assuming that the transferor is not, at any relevant time, exempt from tax, thereby allowing it to satisfy the requirement in paragraph 41-20(1)(a) (that is, the transferor must be able to deduct an amount during the income year under the capital allowance rules, such as claiming depreciation deductions); and

•                      by deeming Sub-division 126-B (as modified by sub-clause (2)) to apply for the purpose of sub-section 41-20(1)(c)(Item 4) (that is, for roll over relief to be available, the transfer of the asset must also qualify for the CGT roll over available for the transfer of assets between companies within a wholly owned group).

The effect of Subclause (3) is that, for the purpose of claiming capital allowances, a transferee under an exempt transfer steps into the shoes of the transferor and inherits the transferor’s deductions and certain other characteristics.  For example, if there is an exempt transfer that Subdivision 41-A applies to, and the undeducted cost of a unit of property to the transferor was $25,000, then the transferee also has an undeducted cost at the time of transfer of $25,000 and claims depreciation deductions using the same rate and method as the transferor (section 42-280 1997 Tax Act).

3.46           Subclause (4) defines exempt transfer to mean the transfer of an asset or liability between restructuring bodies or the transfer of an asset, liability or contract by the Minister under Division 3 of the Bill.  To qualify transfers must be certified by the Minister under clause 36 of the Bill.

Clause 28 - Certified demerger matters not to result in CGT event or assessable income

3.47           Subclause (1) provides that a certified demerger matter will not be treated as being a CGT event and will not give rise to a CGT event for the purposes of Parts 3-1 and 3-3 of the 1997 Act.  This means that matters defined as certified demerger matters will not give rise to a capital gains tax liability for the parties concerned.

3.48           Subclause (2) provides that no assessable income will arise for a person because of a certified demerger matter .

3.49           Certified demerger matter is defined to mean the transfer by HoldCo, to a shareholder in HoldCo, of any of HoldCo’s shares in a subsidiary, the issue of shares by a subsidiary of HoldCo to a shareholder in HoldCo and the cancellation of shares in HoldCo.  Each of these matters must be certified by the Minister under clause 36 of the Bill.  A certified demerger matter may arise from the dissolution of HoldCo and the separation of ownership of R&D FundCo and CommercialCo.

Clause 29 - CGT cost base for share acquisitions

3.50           No amount is payable by persons who will receive shares as a result of the privatisation of AWRAP.  Instead, it is proposed that regulations will provide that shares will be issued based on the amount of wool tax previously paid by persons.  Upon the possible ‘demerger’ of the two proposed HoldCo subsidiaries ( R&D FundCo and CommercialCo ) , shareholders in HoldCo will, in effect, exchange their shares in HoldCo for shares in R&D FundCo and CommercialCo.  Again, no amount would be payable for this exchange (other than the giving up of the HoldCo shares).

3.51           This clause provides that for the purposes of the 1997 Tax Act, the shares persons will receive in HoldCo or upon a demerger will not include any amount in the first element of the cost base of those shares.

Division 7 - Commonwealth funding for research body

3.52           The purpose of this Division is to provide for a payment by the Commonwealth of certain moneys to a declared research body under a funding contract.

Clause 30 - Declaration of research body

3.53           This clause provides that the Minister may in writing declare a body to be the research body (subclause 1).  The Minister must not declare a body to be the research body unless it is a company registered under the Corporations Law of the Australian Capital Territory (subclause 2).  Declarations under this clause will be disallowable instruments (subclause 3).  It is proposed that R&D FundCo would be registered under the Corporations Law of the Australian Capital Territory and would be eligible to be declared by the Minister as the research body.

Clause 31 - Funding contract with research body

3.54           This clause provides for the Minister to enter into a funding contract with the research body (or the research body and other persons). 

3.55           Subclause 1 provides that the Minister, on behalf of the Commonwealth, may enter into a contract with the research body (or with the research body and other persons) that provides for the Commonwealth to make payments to the research body:

•                      in relation to wool tax and wool levy (category A payments); and

•                      per financial year in relation to research and development (category B payments).

3.56           Subclause 2 provides that before entering into the contract the Minister must be satisfied that the terms of the contract make adequate provision to ensure that:

•                      Category A payments are spent by the research body on research and development activities, other activities, or both, for the benefit of Australian woolgrowers; and

•                      Category B payments are spent by the research body on research and development activities for the benefit of Australian woolgrowers and the Australian community generally.

3.57           The Commonwealth is not obliged to pay under the contract the full amounts appropriated by this clause (subclause 3).

3.58           Subclauses (4) to (7) provide an appropriation for the research body contract. 

3.59           For Category A payments the total limit on the appropriation is the sum of:

•                      the total amount of wool tax received by the Commonwealth after 30 June 2000 less any amounts already paid by the Commonwealth to HoldCo (ie AWRAP) before the conversion time; and

•                      the total amount of wool levy received by the Commonwealth.

For this purpose penalties for late payment of wool tax or wool levy are counted.  The reference to both wool tax and wool levy is necessary because Schedule 1 provides for wool tax to cease to be payable after the conversion time, on the assumption that wool tax will be replaced with a wool levy at that time.

3.60           The appropriation for Category B payments has two limits, a total limit and a per financial year limit.  The total limit on the appropriation is the sum of:

•                      the total amount of wool tax received by the Commonwealth after 30 June 2000 less amounts paid to HoldCo (ie AWRAP) before the conversion time; and

•                      the total amount of wool levy received by the Commonwealth.

For this purpose penalties for late payment of wool tax or wool levy are not to be counted. 

3.61           The annual limit on appropriation for Category B payments is the lesser of:

•                      0.5% of the amount determined by the Minister to be the gross value of eligible wool produced in Australia in that financial year; and

•                      50% of the amount spent by the research body in that financial year on activities that qualify, under the contract, as research and development activities.

3.62           Regulations may prescribe the manner in which the Minister is to determine gross value of eligible wool produced in Australia in a financial year.  The term “eligible wool” used in this clause has the meaning given in regulations.

Clause 32 - Setting the rate of wool levy

3.63           Schedule 1 provides for wool tax to cease to be imposed after the conversion time.  It is proposed that instead equivalent levies and charges will be imposed by regulations made under Schedule 27 to the Primary Industries (Excise) Levies Act and Schedule 14 of the Primary Industries (Customs) Charges Act .  Those Schedules make provision for the Minister to declare a specified body to be a ‘designated body’ in relation to one or more specified products.  The Schedules also provide that before the Governor-General makes a regulation in relation to a specified product the Minister must take into consideration any relevant recommendation made to the Minister by the designated body.

3.64           The research body is taken to be a ‘designated body’ for this purpose (subclause 1).

3.65           Before 1 January 2004 the research body must make a single recommendation for the purposes of setting wool levies (subclause 2).  Thereafter the research body must make recommendations so that each recommendation is made not later than the third anniversary of the previous recommendation (subclause 3).  Before making a recommendation the research body must conduct a poll in accordance with regulations.  The recommendation must be in accordance with the results of the poll (subclause 4).  This clause does not apply in relation to regulations that initially impose wool levy.  The initial regulations should come into effect on the conversion time, prior to or at the same time as the research body being declared.  It is proposed that the current rate of wool tax (that is, 3 per cent) would continue until the costs of transition are met, and that the 2 per cent rate recommended by WoolPoll 2000 would then continue until the first poll.

Division 8 - Miscellaneous

Clause 33 - HoldCo not to be a Commonwealth authority etc

3.66           Because Australian Wool Services Limited is the same legal entity as AWRAP, Australian Wool Services Limited might for some purposes, but for this clause, be considered to still be a Commonwealth authority, etc.  This clause provides that from the time of conversion HoldCo is not taken for the purposes of a law to be a Commonwealth authority, established for a public purpose or for a purpose of the Commonwealth or a public authority or an agent or instrumentality of the Crown unless some express provision is made to the contrary by law of the Commonwealth, a State or a Territory.

Clause 34 - Operation of Archives Act

3.67           This clause requires that Commonwealth records are not transferred or dealt with unless permitted by National Archives of Australia under the Archives Act 1983 .

Clause 35 - Compensation for acquisition of property

3.68           This clause is a constitutional safety net providing an entitlement to compensation.  It provides for compensation to be paid by the Commonwealth to a person from whom property is acquired as a result of the operation of the Bill otherwise then on just terms.  If the Commonwealth and the person in question cannot agree on the amount of any such compensation to be paid, the Federal Court may, on application by the person from whom the property was acquired, determine what is a reasonable amount of compensation for the acquisition of the property.

Clause 36 - Certification by Minister that matters relate to restructuring

3.69           The Minister may in writing certify that a specified event, matter or thing that occurs before the second anniversary of the conversion time is related to the privatisation of HoldCo.  This clause will enable certain transactions being carried out within two years of the conversion time related to the privatisation of HoldCo to be certified by the Minister and thereby attract a particular tax treatment that they would not otherwise have qualified for (see Clauses 24 to 29 above).

Clause 37 - Certificates, declarations, etc taken to be authentic etc

3.70           This Clause provides that a certificate, declaration or other document that appears to be made or issued under this Part 2 is taken to be such a certificate, declaration or other document properly given unless the contrary is established.

Clause 38 - Delegation

3.71           This Clause provides that the Minister may delegate all or any of his or her powers or functions under this Act to an SES employee or acting SES employee in the Department.

Clause 39 - Regulations

3.72           This Clause provides the power for the Governor-General to make regulations prescribing matters required or permitted to be prescribed by the Bill or necessary or convenient to be prescribed for carrying out or giving effect to the Bill.  Particular mention is made of the fact that regulations can be made of a transitional or saving nature arising from amendments or repeals made by the Bill.



 

Part 1 - Amendments and Repeals

Australian Wool Research and Promotion Organisation Act 1993

4.1               Item 1

This item repeals the AWRAP Act .

Equal Employment Opportunity (Commonwealth Authorities) Act 1987

4.2               Item 2 - Subsection 3(1) (paragraph (e) of the definition of authority).

This item repeals the reference to AWRAP in paragraph (e) of the definition of authority in subsection 3(1).

Primary Industries Levies and Charges Collection Act 1991

4.3               Item 3 - Section 27. 

This item permits an eligible person to provide to an eligible recipient:

•                      the name, address and ABN of any person who has paid, or is liable to pay, wool levy; and

•                      details of the amount of wool levy that the person has paid, or is liable to pay.

For this purpose an eligible person means the research body (see clause 30 above) or any other person who is a party to a funding contract (see clause 31 above).  The information referred to may be of assistance to an eligible person if, for example, their constitution allows wool levy payers voting rights that reflect the amount of wool levy paid by that wool levy payer member.

Wool Tax Act (No 1) 1964

4.4               Item 4 - subsection 4(1). 

This item provides that wool tax is not imposed under this Act on transactions occurring after the conversion time.

Wool Tax Act (No 2) 1964

4.5               Item 5 - subsection 4(1). 

This item provides that wool tax is not imposed under this Act on transactions occurring after the conversion time.

Wool Tax Act (No 3) 1964

4.6               Item 6 - subsection 4(1). 

This item provides that wool tax is not imposed under this Act on transactions occurring after the conversion time.

Wool Tax Act (No 4) 1964

4.7               Item 7 - subsection 4(1). 

This item provides that wool tax is not imposed under this Act on transactions occurring after the conversion time.

Wool Tax Act (No 5) 1964

4.8               Item 8 - subsection 4(1). 

This item provides that wool tax is not imposed under this Act on transactions occurring after the conversion time.

Part 2 - Transitional and savings

4.9               Item 9 - Continuation of agreements etc

This item provides, for the avoidance of doubt, that the repeal of the AWRAP Act at the conversion time does not affect the operation, after the conversion time, of any agreements entered into by AWRAP before the conversion time.

4.10           Item 10 - Final Annual Report for the Organisation. 

This item provides for the directors of HoldCo to prepare an annual report in relation to AWRAP for the ‘final reporting period’.  Final reporting period is defined to mean the period that starts at the beginning of the financial year in which the conversion time occurred and ends at the conversion time.