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ECONOMICS LEGISLATION COMMITTEE
21/05/2010
Tax Laws Amendment (Research and Development) Bill 2010

CHAIR —The committee resumes and will take evidence from Mr Andrew Mihno from the Property Council of Australia. Do you have an opening statement you would like to make?

Mr Mihno —I do indeed. I will try and keep it as short as possible. Good afternoon to everyone. Thank you very much for the opportunity to come here to talk about the research and development incentive bill. Effectively what I want to address are three principal matters. From a broad perspective, the Property Council has been a long supporter of government’s reform of the R&D incentive regime, especially to ensure that it is better targeted. We support any common-sense measures that are going to deliver appropriate R&D incentives and encourage research and development onshore, the property industry of course being one of the greatest beneficiaries of R&D incentives. It has enabled us to deliver innovative building designs and construction as well as make significant inroads into energy efficiency.

The current proposal has improved some areas of the legislation, but there are some simple points of clarity that need to be resolved to avoid jeopardising the use of the incentives by the property industry as a whole. Given that submissions are going to be provided and tabled later, I will only deal with three issues in brief, and they relate to the operation of proposed incentives through the feedstock provisions, the definition of what R&D is and clarification of a technical exclusion. The comments basically relate to simple changes that clarify the position for industry, but they are nevertheless quite important.

Overall the way the current proposal sits, if strictly read, indicates that R&D for the property development and construction industry could be substantially curtailed due to some difficulties in applying it practically. Specifically, let’s take the feedstock rules, for instance. Again I note the government should be congratulated for listening to industry and returning to the older feedstock rules. However, the extension of the rules to industries that do not use prototypes is impractical in relation to this incentive. By that I mean that the measures do not give the same result for all industries. They work quite well for industries such as manufacturing, where a lot of the cost, testing and R&D is done beforehand, the prototype is made, and then the feedstock rules can be used, essentially taking out a relatively small cost of the R&D.

However, for industries where there is substantial R&D sunk directly into a one-off project at the time it is done, it has the problem that it will deny substantial legitimate R&D costs. Effectively what happens is the developer ends up with a substantially lesser incentive or little incentive. The very simple remedy for this in any case is that the proposed feedstock rules should reflect the original purpose, which applied to mass manufacturers alone.

In relation to the second point, dealing with the definitions of core and supporting R&D, I again thank the government for listening to industry and amending the current core R&D to remove the twin test. However, one thing that we wanted to bring up was that the test now focuses on new knowledge, which can be construed as emphasising research but largely ignoring the development side of the equation. In practical terms, there is a question as to whether a building development that involves on-site R&D can even be considered as an R&D cost under the incentive. For instance, in order to test a green retrofit for insulation or structural reinforcing for a new and innovative type of building, it is necessary to conduct part of the R&D within the building itself to take account of all variables. However, the costs associated with that test may not strictly fit the definition of core R&D, as it is currently defined.

That would be a very unusual outcome, I would have thought. It really depends on how you interpret ‘new knowledge’ regarding improving materials, products, et cetera. That is fairly easily fixed, in fact, by ensuring that the R&D definition indicates that the actual creation of new and improved materials, products, devices et cetera is a part of core R&D. That is actually a very simple change because it involves removing two words from section 355-25, being ‘about’ and ‘the’ in parentheses. Secondly, something that would be extremely useful would be a number of property related examples in the EM. Currently there is one, but a number of examples that would show core R&D for the property industry would be immensely helpful for the industry.

In relation to supporting R&D, the use of a dominant purpose test means that R&D testing done on-site that is subsequently used in the final development arguably may not be able to be claimed, because you might not be able to legitimately claim that it is for the dominant purpose of R&D, even though it was a cost sunk for the purposes of R&D. The only way to have claimed that back would be a rather counterintuitive idea of tearing down the R&D test on the site and then rebuilding a final product, but that would defeat the purpose of it. Again, this is quite simple to fix. Change the dominant purpose test to ‘substantial purpose’, which I think achieves what you are looking to do but also gets us around that rather interesting technical problem. In addition, including examples in the EM in relation to that, specific to property and what can be used as supporting R&D, would be very helpful.

Finally, one of the provisions in the new bill is provision 355-225, which is a building exclusion. Basically it states that building costs for construction are excluded from R&D incentive but does not clarify in what circumstances. In the previous legislation the provision was construed as applying to the construction of R&D facilities. Given the government has indicated that this is not designed to stop construction and property R&D in any sense, it would be a very odd situation if this exclusion were to carry across to all property construction because it effectively excludes it all from R&D. What this really requires is simply a clarification that the scope relates to construction of R&D facilities themselves.

As you can probably see, most of these are very simple changes, but they are changes that will immeasurably help the industry to adjust to the impact of the new R&D.

CHAIR —Thank you very much. Can you give me any indication or ballpark figure about what percentage or what number of construction companies might take advantage of the existing R&D rules?

Mr Mihno —I cannot give you an exact figure on that. I would have thought AusIndustry would be best placed to get that figure. Given that it is generally a privately held piece of information, it is generally hard to get. If you do require it, I am more than happy to go and seek it out.

CHAIR —Okay. Could you give me some feel for that? One of the basic premises of this bill is to improve the number of companies that get access to the R&D bill. I am wondering whether it is the case in your industry that there are a small number of companies taking advantage or whether it is a little bit more widespread than I would have thought.

Mr Mihno —I would consider from discussions I have had with expert consultants and the industry members I have talked to it is quite a difficult incentive to get across the line. What we tend to find is that even very large players in the property industry find it very difficult to use. It tends to be a little bit more select but I could not give you an exact definition. In any case, as I pointed out before, if these changes are made it will certainly make it a lot easier in that regard.

CHAIR —Yes, that is what I was thinking. Indeed, the current definition would seem to me to be quite difficult for the construction industry to overcome, in terms of appreciable novelty or high levels of technical risk. You just would not put up a building with a high level of technical risk, would you?

Mr Mihno —That is right. There is that obvious technical issue of the chicken and the egg in relation to buildings in themselves. You do R&D to be able to create a product at the end, so you get into this circular problem of how much of the R&D was in relation to pure R&D and how much of it was simply what you would have done anyway for the property itself.

CHAIR —I am wondering how much of the R&D is done by the construction companies, as opposed to people who go off separately, form an R&D type company and then, once they have proved or taken a product to an initial stage, take it to the construction companies to incorporate it.

Mr Mihno —I will take that on notice, because it is an interesting question. I will certainly ask a number of people in relation to that. You will find that when you are talking about construction and property R&D, you are talking about very big projects. In many cases you are talking about iconic buildings or buildings on difficult sites—for instance, buildings where you might want to have a 75-storey residential tower but simply put it on a piece of land the size of a normal residential housing estate plot. That presents significant problems. It is not something that an SME would be able to do; it is something that a very large player does. It really depends entirely upon what sort of R&D you are talking about. Within the property industry there is a very definite division in terms of what R&D gets done by which particular players. If you are talking about R&D incentives at the large end of town, it would be done for these iconic buildings or very ambitious projects.

CHAIR —Someone like Arup might do the more innovative types of construction.

Mr Mihno —Perhaps.

CHAIR —Someone with that sort of engineering expertise. In terms of the core research and the supporting activities, could you just go back to the detail of that from your point of view? I missed a little bit of that. You were talking about the supporting activities and how they relate back.

Mr Mihno —Sure. In relation to the supporting R&D activities, when you look at it, it says that the activities are done for the dominant purpose of research and development. This is an inherent problem for the property industry because when you look at a particular site and you do R&D because you do not know, for instance, how much reinforcing you need to make this ambitious tower stand up, you have to do it on-site. The reality is that once you have done that particular piece of R&D and you have proven that it will stand up, it is just efficient economics to try and use that in the building itself rather than tearing it down and doing it all over again, which would just be a waste of money. But once you do that, once you cross that line, you end up in a situation where you say, ‘Well, did I do that particular structure for the dominant purpose of R&D, or did I do it to build the building?’ It is a very difficult thing to resolve from our point of view, which is why we are looking for this circuit-breaker.

CHAIR —I may be wrong but I think that Treasury addressed this to some extent yesterday. They said that if the use of it in the building related it directly back to that R&D then that would be regarded as supporting the R&D—that percentage of the cost of the building.

Mr Mihno —From our point of view as an industry, especially at the higher end of town where they are inherently conservative and do not want to get on the wrong side of anyone, it would be worth while clarifying that in the documents—through the legislation itself, as we have suggested, and/or through the EM, with examples.

Senator EGGLESTON —You have suggested that the dominant purpose clause should be changed to substantial purpose, which is what a lot of other witnesses have suggested. That would obviously greatly improve the way this works for your industry. I am a little bit fascinated by the fact that the building industry does research and development of a kind that would attract benefits under these provisions. Does the building industry publish its work anywhere? Do you come up with some new way of doing things or some technique which is then published in a journal of some kind?

Mr Mihno —There are journals. Every single organisation, like any other proprietary company, would guard its particular research and development, but they would also showcase the end results through their website or their brochures, et cetera. But it is like anything else: there is very intensive research and development going on at certain levels because that will enable them to make lighter and cheaper structures and do it faster, which obviously gives them the marketing edge. Once the information is there, you can use it moving forward and it benefits everyone.

Senator EGGLESTON —Does your industry have any products, if you like, which you own intellectual property rights for, or ideas and techniques that are sold under licence around the world to other building developers?

Mr Mihno —I am afraid I do not know the answer to that question. I will take that on advisement and I can certainly come back to you with that. I would rather not answer it now, simply because it would be misleading.

Senator EGGLESTON —That is fine. It would seem, though, that most of what you do is very much related to a building purpose and the process of production. So I can see the rationale for you wanting this change. I think that in fact would be a very good recommendation for this committee to take up—to change ‘dominant purpose’ to ‘substantial purpose’.

Mr Mihno —I am very glad to hear that. Thank you.

Senator BUSHBY —Mr Mihno, thank you for assisting us today. Have the issues that you have raised today been raised previously with Treasury officials or other officials of the government?

Mr Mihno —Yes, they have. This has obviously been an organic process, because Treasury have been coming out with drafts as they go. As a new draft comes out, it invariably gets refined and moves a little bit further along. But the substantive nature of what we are talking about has been discussed with Treasury.

Senator BUSHBY —So the problems or the concerns that you have are particularly in relation to those three issues, but I presume there are others. You mentioned you had issues that you might deal with in a separate submission.

Mr Mihno —Yes.

Senator BUSHBY —But you have raised these issues with Treasury as they have been relevant to the respective iterations of the proposal that have been put before you.

Mr Mihno —Exactly. That is right.

Senator BUSHBY —Presumably some of them at least, if not all, have appeared in earlier iterations of these proposals?

Mr Mihno —Yes. As I was pointing out, the Treasury officials have taken on board a number of the comments that we have made, and it is, of course, an iterative process as you move along.

Senator BUSHBY —Yes, but not to the extent that they have satisfied all the concerns.

Mr Mihno —That is right.

Senator BUSHBY —In respect of those concerns that are outstanding, have officials given you any explanation as to why they have not incorporated changes to address those?

Mr Mihno —Not officially. To be fair to Treasury, the reality was that we had our final consultation in relation to this. They went away and considered the issues that we brought up and we had a long discussion. Then they introduced the bill into parliament fairly shortly thereafter, so there was not actually time to consult with them in relation to that. I have called them in relation to these matters to identify which issues were taken up and which ones were not, but at the time, as you can probably appreciate, with everything that is going on we were not able to have a long and in-depth formal discussion about what is going on.

Senator BUSHBY —As I understand it, the final form of the bill was produced and lodged in the parliament very quickly in April without any further consultation subsequent to that of the earlier drafts.

Mr Mihno —We had a separate consultation with Treasury directly as the Property Council to address our issues between the public consultation and the final bill being introduced. That was us addressing some of the iterative developments in these processes, but we never got to the point of being able to determine where that got to until, obviously, the introduction came out.

Senator BUSHBY —Are you able to outline today what reasons you were given in your unofficial discussions with Treasury for their not accepting some of the suggestions that you made?

Mr Mihno —Let me talk very briefly about that.

Senator BUSHBY —The final feedstock changes were made after that, I would imagine.

Mr Mihno —Just let me have a look at the feedstock changes. I am just trying to remember what I wrote in my last submission. The issue with the feedstock rules is obviously one they took up as part of the process and they made some adjustments in relation to that. In that regard, they took up that particular consultation recommendation.

Senator BUSHBY —In whole?

Mr Mihno —Not in whole.

Senator BUSHBY —You are still raising issues with feedstock today.

Mr Mihno —That is right. As we said, our recommendation previously was to just adopt the old rules as they were.

Senator BUSHBY —As Treasury officials told us yesterday they had.

Mr Mihno —There is an extension in the EM that indicates that it will apply to particular industries outside of mass manufacturing and mining.

Senator BUSHBY —On your reading of what has been put before parliament, there have been changes to the feedstock provisions compared to what currently exists.

Mr Mihno —That is right.

Senator BUSHBY —What about the other areas—the definition of R&D and technical execution?

Mr Mihno —In defining R&D, we raised the concept that the twin test was very difficult to get across the line. In fact, in many cases it was nonsensical for the industry. That was taken on board. Obviously the end result was that they changed the rules and changed the definition. What we have effectively got now is a new definition, so we are now responding to that new definition.

Senator BUSHBY —That first became apparent when it came out in the bill. Is that correct?

Mr Mihno —Yes.

Senator BUSHBY —You had not had a chance to look at that beforehand.

Mr Mihno —No.

Senator BUSHBY —And you have raised some issues about that today.

Mr Mihno —I have.

Senator BUSHBY —Yes, and you have not had a chance to address those issues with any officials since that was introduced into parliament?

Mr Mihno —No.

Senator BUSHBY —And your third point?

Mr Mihno —The third point, the clarification of the technical exclusion, is something that existed previously. We raised that with Treasury. It appears that no developments were made in relation to that, so we are raising that issue again.

Senator BUSHBY —One of the reasons I asked those questions in the way I did was that Treasury yesterday also indicated that in their opinion all real issues—and when I say ‘real issues’ I do not want to paraphrase them or misquote them—had been addressed. Basically, they said that all issues that were put to them with sufficient information that they could understand and in a way that made a case had been addressed and that any remaining issues were really based on a misinterpretation of the proposal by those who considered the issues still exist. Given that, to what extent are your concerns based on a detailed analysis of the proposed legislation?

Mr Mihno —In relation to that, obviously we have had the week to go through the legislation since it was introduced into parliament, and we have experts who deal with this and who live and breathe R&D. I have been taking advice in relation to this from them.

Senator BUSHBY —These are in-house experts?

Mr Mihno —No, not my in-house experts; these are industry experts—people who deal with R&D and industry.

Senator BUSHBY —You have consulted with industry experts, you have had a very good look at this and you have identified the issues that you have raised with us today as being real, based on the words that have been used in the proposed legislation.

Mr Mihno —That is right.

Senator BUSHBY —Among your members, how reliant is the development of new and innovative approaches to building design and the other things that you do on the availability of R&D tax concessions? How important is it for those innovations?

Mr Mihno —The simple answer is very. For those who use the R&D concessions or incentives, it is the difference in many cases between taking a risk and doing something new and doing something very simple. The classic example I could give you is one where one of the very innovative property players is building an extremely tall high-rise, a 75-storey high-rise, on a very small piece of land. I have a bit of technical jargon for you here. Usually the ratios are eight to one for land to height, and this is 13 to one. So it is literally like putting a pencil on its end.

It effectively means that you can fit much more residential area into a small space, which is of course of great benefit to the community, given the concept of urban sprawl et cetera. But they have had to embark on R&D because a 75-storey building has sway factors and things like this. It has never been done in Australia. The technology or the expertise to be able to do that is not readily available anywhere, unless you are going to ask a foreign company to come to Australia and do it, but bringing in foreign expertise defeats the purpose of having a R&D incentive. These people are in a position now where they are going ahead with this tower. The R&D is absolutely crucial to them being able to make this thing stand up.

Senator BUSHBY —That is a good example. You mentioned the community benefit, and that is something I was going to ask you about. You use the example of the community benefit being in respect of the population density. What other public benefits might flow? We are talking here largely about one-off types of developments.

Mr Mihno —That is right.

Senator BUSHBY —What other public benefits might flow from government investing through such incentives in your industry?

Mr Mihno —The classic example is jobs. Every single new innovation creates an opportunity to provide a project. With each new project, there are more jobs. There is greater prosperity for the economy, especially the direct regional economy in that particular area. Leaving that aside, the innovation itself, far from sitting with that one particular tower, then gets used in every other tower. For instance, in relation to that example that I told you about, with the R&D that they are doing they are now proposing a number of other towers that also are very tall. It is directly off the back of that, so there is a multiplier effect. In addition to all of that, you have the greater efficiency. You can build faster, you can build cheaper and you can build lighter, which means that it becomes much more affordable. That translates into the hip pocket for residential purchasers.

Senator CAMERON —I am interested in these 75-storey towers. How much did that 75-storey tower depend on government financial support for R&D?

Mr Mihno —I am sorry, in what respect? What percentage of that particular project?

Senator CAMERON —Yes.

Mr Mihno —In that particular circumstance, I do not have an exact figure for how much money related to that, but I can tell you, for instance, that for a similar structure where they had to build part of the superstructure to determine the sway factor the R&D for doing that entire superstructure and testing it amounted to approximately 20 to 30 per cent of the entire cost of the building. But I must emphasise that that depends entirely upon the building itself. It is not something that you can equate to projects across the board.

Senator CAMERON —This is what I am concerned about. You argue that we should move the test from ‘dominant’ to ‘substantial’. Evidence we have heard says that the biggest benefit to the economy would come if we focus R&D on small start-up IT companies and high-tech companies. If we have 75-storey towers being 30 to 40 per cent funded by research and development, that makes it very difficult for the rest of the economy or the rest of industry to get a fair shake out of what is available, doesn’t it?

Mr Mihno —When you say 30 to 40 per cent, probably what I should clarify is that 20 to 30 per cent, which is what I think I actually said—

Senator CAMERON —Sorry.

Mr Mihno —That is quite all right. Twenty per cent to 30 per cent represents the R&D cost against the total cost of the building. If you look at that in after-tax terms, that is about a 7.5 per cent tax benefit on a building that, if it is successful, will create a profit flow which is taxed at 30 per cent. So the net benefit is actually flowing to the government and to the taxpayers at large for doing that. The other issue I would probably raise there is that, if you look at the concept of green retrofits for buildings, something which is going to be a massive project moving forward—

Senator CAMERON —Can I go to retrofitting later? I would like to stay on this other issue before we go to retrofitting.

Mr Mihno —Sure.

Senator CAMERON —The analogy I am trying to make is that the building and construction industry is a bit like the pharmaceutical industry. The pharmaceutical industry does its research and development off market because you cannot put something into the market that is going to kill a patient. It is a bit like the construction industry. A lot of your research and development has to be off market because you cannot start building a 75-storey construction unless you are pretty well sure that all the engineering design is right, the materials are right and that you have done all of that research and development, which could be quite substantial, off market before you start building. I am not sure how you would get venture capital to dig a huge hole in the ground for a 75-storey building, put the foundations in, and have the potential, once you get up 10 storeys, to can the project. Does that happen? Tell me where that has happened.

Mr Mihno —I am not aware of that. I am aware of an example of it happening in the UK, but they did not can the project. What they did—

Senator CAMERON —I am not interested in that. I am talking about here. Where in Australia has the building industry set about an innovative project design, done all the technical work behind the scenes, dug the foundations, started the project and said, ‘This doesn’t work’? That is an important issue for me in terms of providing 20 to 30 per cent support.

Mr Mihno —I am not aware. In fact, I have asked that very question. I will take that on advisement because it is a question that I would like to go into in a bit more depth on with a few more industry players. But my answer to that is that I do not know of a project that has fallen over for that reason. The simple reality is that, wherever possible, you would maintain and fix the structure. That would involve further cost.

The simple reality is that there is also a hard decision to make here as to what government wants to do with its incentive. I am aware that you are alluding to that, but if you want iconic buildings, if you want buildings that are going to be more efficient moving forward, if you want buildings that are going to be cheaper and faster to build, then the hard decision has to be that you are going to continue to support the property industry by giving an R&D incentive to allow them to do this work.

Senator CAMERON —I am not arguing that you are not entitled to an R&D incentive.

Mr Mihno —No.

Senator CAMERON —I am simply saying that I equate the property industry more to the pharmaceutical industry, where the R&D is done off market, the proving is done off market and the amount of proving that has to be done before you start building would be minimal. I have been involved in superannuation funds and I am sure we have had innovative building projects coming to us but we have never been told, ‘Look, you put up the money for this, you pay for the foundations and we will have to wait until we are 10, 15 or 20 storeys in the air before we can tell you if this investment is going to work.’ I have never had that, ever. I am just not sure that this argument you are putting forward as to why government should support this on-site testing stacks up. It does not happen that way, to my knowledge.

Mr Mihno —Let me give you another example that might add to this. I want to get these details right, so just pause with me for one second. Currently there is a thing called fire rated structural steel for columns and beams. Again, there is an innovative company that wants to use these particular beams in a residential high-rise, which has never been done. They have a very real risk. They do not know exactly how to do this particular project and they are never going to know until they get up there. They can get to within 70 or 80 per cent sure, let’s say, just to pluck a percentage probability out of the air. But I was talking to them today and they said there is a very real risk. ‘We have to do this, and if we are doing this then we’re going to be relying on R&D to be able to get it right.’

Senator CAMERON —But wouldn’t they be required to get building approval and safety authorities to even commence? You are the expert and you can tell me, but I would not have thought that building a 75-storey high-rise is the equivalent of testing something on a production line somewhere in the manufacturing industry. It just does not work like that.

Mr Mihno —You do not build a 75-storey tower and say, ‘Wow, thank God it stands up.’ What you do is you build a superstructure that is a certain height that will enable you to test whether or not it will work under safe conditions.

Senator CAMERON —And it never fails, to your knowledge, in Australia.

Mr Mihno —No, I did not say that. I said I do not have any examples where it has failed, but that does not mean it does not fail.

Senator CAMERON —Can you take it on notice and provide the committee with any example where there have been failures and significant losses to a building company because the design just fails some of these basic tests?

Mr Mihno —I will definitely do that. Again, I put this out more as a point to clarify on my behalf, but you do not build a 75-storey tower incomplete with a massive uncertainty. What you do is you go to the site and you build the superstructure to a certain height. The superstructure is not building the floors complete to a certain height; it is simply the framing. In particular in relation to a very thin building, you would set up the test. You put dampeners on top of the structure and shake it as hard as you possibly can to see what happens and make sure that it actually works. You would monitor it. If it looks like it is not going to work, you go back to the drawing board and you figure out what it is you need to do to reinforce that to make it work. It still involves risk and loss because there is money involved in doing all of that; it is just that it is not such a complete and substantial loss. But, again, I will take it on advisement and I will get that information.

Senator CAMERON —I am not sure how much of that is research and development or trying to fix a faulty design.

Mr Mihno —I suppose it is semantics. If nobody knows how to do it in the first place, that is research and development. If you have to look at a question and decide whether or not it is going to work and there is a risk in it, then it is research and development.

Senator CAMERON —One of the examples that has been discussed in the committee, and I am sure you have heard about it, is the building industry claiming the cost of a whole building because there is innovative air-conditioning being fitted in the building. Have you got any comment on that?

Mr Mihno —Yes, I can comment on that. I saw that. I read Senator Carr’s comments in relation to that, and they took me by surprise to the point where I asked a number of experts, both consultants who work in the area and a number of the companies themselves. I am aware that obviously there is a real project that this relates to—it is not just plucked out of the air—but we find it quite hard to understand how you could possibly have claimed 100 per cent of the building without AusIndustry turning around and rejecting it out of hand. The current rules, on a reasonable reading, do not allow you to do that.

I am aware, and I say as a qualifier, that I do not the details. I only have two lines and what you have just told me. There may be a perfectly legitimate reason as to why it would be the case, but if you are saying to me that there is $15 million worth of R&D, full stop, and there is a $100 million build and they are claiming the whole thing, then no, I cannot see how you would do that. I am surprised that it would get through AusIndustry. Equally, though, I am aware that the nature of R&D in our industry, and the fact that there are so many variables that you need to deal with and that you deal with on-site, means that some part of every building will be R&D.

Senator CAMERON —Don’t you agree, then, that we have to guard against that? I am sure you do not agree that that is a reasonable proposition. If there is a claim for 10 per cent of the build then we end up with a 90 per cent addition to that. That just seems to me to be a crazy proposition. That is why some of these ‘dominant’ versus ‘substantial’ arguments come in. Could you advise the committee on notice how moving from dominant to substantial will guard against the type of claim that was made in relation to that air-conditioning example that has been discussed at various committee meetings?

Mr Mihno —Can I impose on you to give us the full example of how that came about? I cannot give you information on that without knowing the detail of what the actual claim was. It would be irresponsible of me—

Senator CAMERON —And it would be irresponsible of me to breach privacy.

Mr Mihno —I am aware of that.

Senator CAMERON —You would be the first to say that I should not do that. But what I can tell you is that the project involved the construction of a new building that has a stated design goal of meeting newly emergent accreditation standards. The core R&D centres on improving air-conditioning, yet the company has registered around $100 million for the R&D project, of which 85 per cent is the cost of constructing the building, which the company regards as a prototype to test the R&D. The actual core R&D activities probably represent less than 10 per cent of the company’s claim. I am not asking you to comment on a specific, detailed analysis; I am saying that that is the claim that was made. I would like your comments on that and how moving from dominant to substantial would guard against that misuse, in my view, of public finances.

Mr Mihno —Certainly, I can do that.

CHAIR —Thank you, Mr Mihno. We have run out of time. Thank you for coming along this afternoon. Thank you for your evidence.

Mr Mihno —Thank you.

[2.41 pm]