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Liberal party president warns treasurer of impact of the GST on the clever country

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CRAIG EMERSON TANYA PLIBERSEK? _____Member for Rankin_____________ Member for Sydney_____


Liberal Party President, the Hon Tony Staley, has written to the Treasurer warning him o f the impact o f the GST on Australia as a clever country.

In his capacity as Chairman of the Co-operative Research Centre Association, Mr Staley wrote to the Treasurer on 2 June 1999 indicating that GST issues "have the potential to adversely affect the operations of

all CRCs".

M r Staley's letter has been released by the Member for Sydney, Tanya Plibersek, and the Member for Rankin, Craig Emerson.

Mr Staley cited a case of a CRC in the environmental sector which, according to tax accountants, could incur a GST liability of more than $700,000 a year on a cash income of just $2.5 million a year, which Mr Staley said would "seriously erode the capacity o f the CRC to function".

Mr Emerson said today Co-operative Research Centres were established by the Hawke Labor Government as the centrepiece of its strategy to make Australia the clever country.

“Making Australia the clever country is even more important now that we are entering the information age, and yet the Government is stifling innovation through its GST.

"Treasurer Costello has been unable to persuade the President o f the Liberal Party that the GST is good for the country, so he is unlikely to convince the rest of us" .

Ms Plibersek said "It is unbelievable that, as Australia seeks to plug into the information economy, the Government is developing tax policies that will disadvantage our information industries".

Prior to Mr Staley's letter to the Treasurer, Treasury had advised the CRC Association that the GST would be revenue-neutral in its effects on CRCs. But the CRC Association has advice from accountants that the GST will have adverse effects upon CRCs unless CRCs are made GST- exempt.

Since CRCs are not exempt from GST they will, at the very least, face large compliance costs and their ongoing viability may be threatened by the GST.

Mr Emerson and Ms Plibersek called on the Treasurer to clarify the treatment of CRCs under the GST and to provide an assurance they would not be adversely affected.

Contact: Craig Emerson 0418 781 386 Tanya Plibersek 0413 777 787


>The Hon. Peter Costello . >Treasurer, ▻ Parliament House ▻ CANBERRA ACT 2600 ..... ,

> . ~ · . ■

>Dear Treasurer. ' :

▻ Cooperative Research Centres an d GST ; > ' '

Presentations by expert tax consultants at the recent annual Cooperative >Research Centres Association Conference kr April raised severer questions >about the potential impact of GST on Cooperative Research Centres. T he " >Association represents most of the Cooperative Research Centres which have

>been set up to bring researchers and research users together to faciState >the more rapid uptake of the results of research for the benefit of >A"stralla. The CRC Program is a Commonwealth Government initiative to >foster innovation in the Australian economy.

> . .

>We would be grateful for clarification on the following issues which are of particular concern: < '

> .

>1. Will the Commonwealth Grant to the CRCs be subject to GST? One >interpretation of the proposed legislation is that the Commonwealth Grant >to CRCa would becorne taxable if it was seen a s "consideration for supply* >fbr service to the Government '■ ■

> . : ; -■■■ . . . . . . ■ . .. ·â– ; · ·

>2. Will the cash value of in-kind contributions from the organisations ▻ partlc^ating in CRCs f Parties to the CRC”) be subject to GST? One interpretation of the proposed- legislation is that the in-Wndl· : >contributions are consideration in- return for research! services. , ■

>3. Will grants from- industrial Parties to CRCs be subject to GST? For ▻ example, at least two .of our CRCs have block grants from a Research arid ▻ Development Corporation; these are not unlike grants curreriily awarded by . ▻ that particular Research and Development to Universities and other Agencies ▻ such as CSIRO for research.. ' T

>. . ■ _ ■ ■ ■ - . : '-.. · ' ■ : * * . .

>4. Will grants from the CRC to Universities and other organlsations for : ▻ research or students scholarships be subject to GST? Again, fiieee are not ▻ unlike grants currently, awarded by the Australian Research. Council and ▻ other granting agencies. ^

> . . . t. ' ..· .. '

▻ CRCs are very diverse in their operations.: The "Review of Greater ; . . ▻ Commercialisation and Self-fodning in the Cooperative Research Centres ▻ Programme" commissioned by the- current Government, identified four main ▻ categories of CRC - those with a Γ ;

▻ ? Commercial focus arid linked with specific: users .= ■ ; :

>? Commercial plus public interest focus linked with industry development ▻ and new firm formation p ; -.

>? Commercial focus but generally more “diffuse" Industry involvement ▻ (through Industry Associations) : '

▻ ? Underpinning sustainable resotsoe use

▻ Following the scenarios presented by tax accountants, one case study Is ▻ provided for a CRC in the Environmental Sector that underpins sustainable ▻ resource use. If items 1 to 3 attracted GST then its potential liability ▻ for the GST could exceed more than $700,000 per annum, most of this from ▻ some $5 million worth- of "in-kind" contributions. Given that this ' ▻ particular CRCs cash income is $2 5 million ($2 million for the CRC grant ▻ and $0.5 million in a grant from a Research & Development Corporation), a ▻ broad interpretation of liability for GST would seriously erode the - ▻ capacity of the CRC to function. : . ^

▻ We would very much appreciate advice on these matters as they have die- ▻ potential to adversely affect the operations of all CRCs. > "

▻ I append briefing notes about CRCs and the CRC Program. > ■ ' . .

▻ Yours sincerely.

▻ Hon. Tony Staley ▻ Chairman