Bills Digest No. 87, 2019–20
PDF version [1008KB]

Andrew Maslaris
Economic Policy Section
26 February 2020

Contents

The Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Background
Current Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions

 

Date introduced:  5 December 2019
House:  House of Representatives
Portfolio:  Treasury
Commencement: The first 1 January, 1 April, 1 July or 1 October after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at February 2020.

The Bills Digest at a glance

The Bill re-introduces changes proposed to the Research & Development Tax Incentive (R&DTI) that were included in the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 (the 2018 Bill). The 2018 Bill lapsed at the end of the 45th Parliament.

Key changes

The Bill seeks to make a number of changes to the R&DTI program.

Schedule 1 seeks to better target the R&DTI and improve its effectiveness by implementing the Government’s response to the Review of the R&D Tax Incentive[1] (Review of the R&DTI). Specifically, Schedule 1:

• Reduces the R&DTI tax offset rates as follows:
  • for small R&D entities (less than $20 million annual aggregate turnover)—reduced from 43.5 per cent to the entity’s corporate tax rate plus 13.5 per cent
  • for large R&D entities ($20 million or more annual aggregate turnover)—changed from 38.5 per cent to the entity’s corporate tax rate plus an additional amount as determined by an R&D intensity premium (broadly, the premium is calculated with reference to the percentage of total expenditure a company spends on R&D).
• Increases the maximum amount against which an R&D tax offset may be applied from $100 million to $150 million. Amounts in excess of $150 million will be subject to the ordinary deduction rates—the entity’s corporate tax rate.
• Reduces the maximum amount of refundable R&D tax offsets for small R&D entities to an annual limit of $4 million (currently there is no limit). To the extent the R&D expenditure relates to a clinical trial, that expenditure is not counted towards the $4 million cap.

Schedule 2 aims to enhance the integrity of the R&DTI by ensuring that R&D entities cannot obtain inappropriate tax benefits. Schedule 2 also prevents double claiming of the R&DTI by allowing the Government to ‘claw back’ the benefit of the R&DTI to the extent that an entity has received another benefit in connection with an R&D activity.

Schedule 3 seeks to improve the administration of the R&DTI, increase transparency and improve the R&DTI guidance framework and provide greater certainty to applicants.

Stakeholder concerns

The Bill has been heavily criticised by industry and the professional services sector who have labelled it a ‘Budget savings measure’. In particular, stakeholders consider that the Bill departs from the original intent of the recommendations of the Review of the R&DTI and the National Innovation and Science Agenda[2] (NISA) by not redirecting and reinvesting Budget savings in R&D and sharpening the focus of the R&DTI.

Many stakeholders, including Deloitte (which has been particularly vocal) have also been heavily critical of the Government for re-introducing a relatively unchanged Bill given the Senate Economics Legislation Committee did not endorse the R&DTI measures contained in the 2018 Bill.

Schedule 2 and Schedule 3 of the Bill appear to be relatively uncontroversial.

Summary of key issues

Perhaps the biggest issue presented by this Bill is that the Government has re-introduced a largely unchanged and heavily criticised Bill.

Given significant stakeholder concerns about the intensity premium, Parliament would benefit from additional explanation as to why the proposed design of the intensity premium has been chosen, and whether stakeholder concerns that the premium will disadvantage businesses with Australian operations are accurate. Further, Parliament would also be better placed to evaluate the merits of the Bill, if additional transparency and data was provided regarding:

• the number of businesses expected to have an increased or decreased R&D tax offset rate as a result of the Bill
• a breakdown of the Budget savings attributable to changing the R&D tax offset rates, and limiting the refundability of the R&DTI
• whether the reduction in corporate tax rates for base rate entities (which has seen the R&D tax offset benefit for base rate entities increase) has had any meaningful impact on R&D expenditure by base rate entities.

Further, notwithstanding the NISA and Australia 2030: Prosperity Through Innovation[3] report, the Government and the Bill have focussed specifically on select elements of the R&DTI program, rather than a broader examination of the overall effectiveness and suitability of Australia’s current R&D policy mix.

Specific issues raised by the Bill

Some of the key issues that have been specifically raised in relation to the Bill include:

• The intensity premium: it has been argued by a number of stakeholders that the intensity premium is poorly designed and is likely to discriminate against businesses with large amounts of Australian non-R&D expenditure, thereby creating an incentive to reduce Australian based people functions.
• Reduction in meaningful incentives: it has been argued that a large number of businesses will fall within the first tier of the R&D intensity premium, meaning that their R&D tax offset will be reduced from the current benefit of 8.5 per cent to only 4.5 per cent.[4] Stakeholders have contended that this will result in R&D being outsourced to countries with more favourable R&D incentives.
• The Bill does not enact the spirit of the NISA or the recommendations of the Review of the R&DTI: the majority of stakeholders have expressed disappointment that the Bill does not redirect $1.8 billion in Budget savings into improving R&D incentives.
• Collaboration premium: stakeholders, especially those in industry and the university sector, have been highly critical of the Government’s decision to not adopt the Review of the R&DTI’s recommended collaboration premium. However, as discussed in the key issues section of this Digest, both the Government and Parliamentary Budget Office have queried whether such a proposal would generate new R&D activity, or instead see a redistribution of existing R&D activities.
• Capping refundability: some stakeholders have expressed concerns that capping refundability will have a negative impact on start-ups and innovative companies. Similar views have also been expressed by the mining sector.[5]

Purpose of the Bill

The main purpose of the Bill is to implement the Government’s response to the Review of the R&DTI, as well as:

• improve the integrity of the R&DTI
• increase the level of public disclosure of entities claiming the R&DTI and their amounts of claimed R&D expenditure and
• enhance the administration of the R&DTI by expanding the role and functions of the Board of Innovation and Science Australia.[6]

The major difference between this Bill and the 2018 Bill is to change the rates and thresholds of the R&D intensity premium and to further simplify the premium by reducing it from four tiers to three tiers.

Structure of the Bill

The Bill contains three related Schedules:

• Schedule 1 seeks to better target the R&DTI and improve its effectiveness by implementing the Government’s response to the Review of the R&DTI
• Schedule 2 aims to enhance the integrity of the R&DTI by ensuring that R&D entities cannot obtain inappropriate tax benefits. Schedule 2 also prevents double claiming of the R&DTI by allowing the Government to ‘claw back’ the benefit of the R&DTI to the extent that an entity has received another benefit in connection with an R&D activity
• Schedule 3 seeks to improve the administration of the R&DTI, increase transparency and improve the R&DTI guidance framework to provide greater certainty to applicants.

Background

Purpose of R&D tax incentives

It is well established that successful R&D and innovation policies can facilitate improved productivity, maintain high wage jobs, and drive greater economic prosperity and living standards.[7] Broadly speaking, this is most likely to occur where an R&D policy is able to modify behaviours to generate additional R&D activity that would not have occurred without the incentive and lead to spillovers for other businesses and society more generally.[8] Although increasing R&D expenditure may on its face appear to be a desirable goal, merely increasing R&D expenditure does not necessarily guarantee higher levels of productivity in the absence of meaningful additional R&D activity and spillover effects.^[9] As such, the Australia 2030: Prosperity through Innovation Report, identified as a strategic opportunity for Government ‘better targeting the R&DTI and increasing support for direct grant programs that target national priorities’ in order to ‘ensure Australia’s ongoing prosperity by stimulating high-growth firms and improving productivity’.[10]

Although the theory behind R&D tax incentives is simple—all else being equal, firms are likely to react positively to lower tax rates and increase their level of R&D expenditure—there is mixed evidence as to the overall effectiveness of R&D tax incentives as a policy tool for increasing additional R&D expenditure that generates spillovers.[11]

On one hand, many stakeholders submitted to the Senate Inquiry that tax incentives are essential to driving innovation in Australia;[12] StartupAUS credits Atlassian’s ‘build local, sell global’ business model to the existence of the R&DTI program.[13] Conversely, as noted by Professor Ben Martin, despite an abundance of literature on the economics of science and R&D, there is a significant shortage of academic analysis of the actual R&D policy instruments themselves (including the R&DTI).[14] In particular, there is limited empirical evidence surrounding their effectiveness, their interactions, and their relationship to their wider environment.[15] Rather, the majority of this analysis is in what Ben Martin terms, ‘grey literature’—that being ad-hoc Government reports.[16] Further, despite their popularity, tax incentives have been criticised for being ineffective and triggering negative externalities.[17]

A clear driver of these diverging views as to the effectiveness of R&D incentives is that there is a lack of credible and reliable empirical research on their effectiveness.[18] This lack of credible and reliable empirical research can make it particularly challenging for policy makers to develop robust and effective R&D policy frameworks.

International trends in R&D tax policy

The OECD Review of national R&D tax incentives and estimated of R&D tax subsidy rates, 2017 (OECD paper) identified a general trend amongst countries over the last decade of increasing the availability, simplicity and generosity of R&D tax incentives.[19] The OECD paper also concluded that more countries rely on tax incentives to foster R&D activity than a decade ago.[20] Other trends in R&D policy included:

• an increased focus on basing tax incentives on volume or level of R&D activity
• the use of minimum and maximum expenditure thresholds
• modifications to the definition of qualifying activities and
• modifications to tax or credit rates.[21]

The OECD paper concludes that in 2017, 30 out of 35 OECD countries and 21 of 28 EU countries provided some form of R&D tax incentive.[22] Although the OECD paper notes that in 2017 Germany did not provide R&D tax incentives as a policy tool,[23] Germany has subsequently re-introduced a new R&D tax incentive with effect from 1 January 2020, amidst concerns that German businesses aren’t keeping up with digitalization and new technology.[24]

Although there is significant usage of R&DTI programs amongst OECD and EU countries it is important to understand the design of these programs can differ significantly and can make international comparisons challenging. For example, they may differ as to:

• eligible activities—although most countries adopt the definition of R&D contained in the OECD’s Frascati Manual,[25] countries may target the incentive by including or excluding specific activities and functions
• the type or size of firms—tax incentives may be targeted according to entity type, evolutionary phase of a firm (for example, is the entity a start-up or an established business) or firm size and
• eligible R&D inputs—tax incentives may provide tax relief for specific activities and inputs. For example, a country may limit R&D tax incentives to only core or supporting R&D expenditure in relation to novel or new research or outputs, or by imposing intensity premiums or nexus requirements. Countries may also seek to exclude certain activities. For example, specific rules often exist as to who is eligible for R&D tax concessions where the activities or functions are sub-contracted out to another entity.[26]

Australia’s R&D policy mix and expenditure

R&D incentives can generally be classified as either direct or indirect measures. Indirect R&D incentives are usually delivered through the tax system and seek to incentivise R&D activities by providing:

• tax relief for expenditure, usually in the form of a tax credit, allowance or ‘accelerated deduction’ and
• tax relief for eligible revenue, usually in the form of a concessional tax rate for eligible income, or exempting income from income tax.[27]

Alternatively, the Government may seek to incentivise R&D activity through grants (known as direct R&D expenditure).

In the Australian context, the Government adopts a mix of direct and indirect R&D expenditure. The Science, Research and Innovation (SRI) Budget Tables[28] estimate Australia’s 2019–20 total R&D investment will be approximately $9.6 billion, comprising approximately:[29]

• $2 billion in R&DTI expenditure
• $2.1 billion in direct Government research activity expenditure[30]
• $3.6 billion expenditure on the higher education sector and
• $1.8 billion in expenditure provided to multisector recipients.[31]

History of Australia’s R&D Tax Concession

1985 to 2011

In 1986 Australia introduced an R&D Tax Concession, which applied from 1 July 1985 and provided an enhanced tax deduction of 150 per cent for eligible R&D expenditure.[32] Although the Concession was intended to be temporary, it was announced it would be indefinitely continued in the 1992–93 Budget speech.[33]

Between 1985 and 2011 there were a number of changes to the R&D Tax Concession. These changes sought to improve its effectiveness, increase the amounts of R&D being undertaken in Australia and generally improve the integrity of the Concession. Notable changes include:

• in 1996 the R&D Tax Concession was reduced from 150 per cent to 125 per cent and the eligibility criteria were tightened. These changes were driven by concerns that the Concession was not tax effective as it was not encouraging a significant amount of R&D that would not have otherwise been undertaken, and that decisions on investments in R&D were often determined by tax consequences rather than the nature of the R&D being undertaken [34]
•  in 2001, the Taxation Laws Amendment (Research and Development) Act 2001 implemented an enhanced 175 per cent deduction for the amount of expenditure by a company that exceeded that company’s average R&D expenditure over the previous three years[35] and
• in 2007 the Tax Laws Amendment (2007 Measures No. 5) Act 2007 introduced a new R&D International Premium—this allowed foreign owned companies to access an enhanced 175 per cent tax deduction for additional R&D activity undertaken in Australia.[36]

On 1 July 2011, the R&D Tax Concession was replaced with the R&D Tax Incentive.[37]

For a complete summary of changes to the R&D Tax Concession, please see pages 11 and 12 of ‘The additionality of R&D tax policy in Australia’ by Russell Thompson and Ahmed Skali of the Centre for Transformative Innovation, Swinburne University.

2011 to today

In the 2009–10 Budget, the then Labor Government announced that it would replace the R&D Tax Concession with a new, streamlined tax incentive.[38] The Tax Laws Amendment (Research and Development) Act 2011 subsequently replaced the R&D Tax Concession with the new R&DTI from 1 July 2011.

In his second reading speech to the Tax Laws Amendment (Research and Development) Bill 2010, Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten stated:

The new incentive is the biggest reform to the business R&D landscape in the last decade. It is all about boosting investment in R&D, strengthening Australian companies and supporting jobs. It provides for increased assistance for genuine R&D and redistributes support in favour of small- and medium-sized enterprises—the engine room of our economy.

Our intention is to lift Australia’s R&D performance by encouraging many more businesses to benefit from the scheme, ensuring Australia’s place as a clever country. R&D activities contribute to innovation by creating new knowledge and technologies—increasing productivity, jobs and economic growth, and allowing Australia to respond to present and future challenges... Small innovative firms are big winners from the new R&D tax incentive, with greater access to cash refunds for their R&D expenditure and more generous rates of assistance.[39]

Further, the Explanatory Memorandum to the Tax Laws Amendment (Research and Development) Bill 2010 stated that the new R&DTI would:

• simplify the complex rules under the R&D Tax Concession and provide improved administrative arrangements[40]
• adopt a clearer and better targeted definition of R&D activities[41] and
• provide more generous benefits for eligible activities than the existing Concession and be better targeted towards R&D that benefits Australia.[42]

Current operation of the R&DTI

Broadly, the R&DTI currently provides entities with a tax offset for the first $100 million of eligible R&D expenditure.[43] The R&DTI offset rates are follows:

• 43.5 per cent for small R&D entities (annual turnover of less than $20 million) and
• 38.5 per cent for large R&D entities (annual turnover of $20 million or more).[44]

Further, the R&DTI is fully refundable for small R&D entities, while large R&D entities can carry-forward unused tax offsets to future income years.[45]

Therefore if a small R&D entity has eligible R&D expenditure of $1 million, it will receive a tax offset of $435,000 (this is higher than the value of the standard deduction amount of $275,000).[46] If the entity has a tax liability of $300,000, the R&DTI will reduce tax payable to $0, and the entity will receive a refund of the remaining $135,000.

In order to access the R&DTI, an entity must satisfy the following requirements:

• be eligible to be registered for the R&DTI
• be registered for the R&DTI and
• undertake expenditure on eligible R&D activities.

Table 1 provides a summary of each of these requirements.

Table 1: summary of the main elements of the R&DTI

Element	Description
Who is eligible for the R&DTI?	Only incorporated entities can access the R&DTI. For the purposes of the R&DTI, an incorporated entity includes a body corporate incorporated under: an Australian law (including a body corporate acting as trustee for a public trading trust)[47] a foreign law that is an Australian resident (including a body corporate acting as trustee for a public trading trust)[48] and a foreign law that is a resident in a country that Australia has a double tax agreement with and carries on business in Australia through a permanent establishment.[49] As such, an individual, trusts (other than incorporated trustees of public trading trusts), partnerships and tax exempt entities are not eligible for the R&DTI.[50]
Registration requirements	An eligible entity can register for the R&DTI with the Department of Industry, Innovation & Science within 10 months of the end of the entity’s income year. An eligible entity will need to register separately for each income year they wish to make an R&DTI claim.[51] Further information about registration is available on the business.gov.au R&DTI webpage.
What activities are eligible for the R&DTI?	Generally only core or supporting activities undertaken in Australia will be eligible. Core activities are defined in section 355-25 of the Income Tax Assessment Act 1997 (ITAA 1997) and broadly include experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or expertise that are based on principles of established science and are conducted for the purpose of generating new or improved materials, products, devices, processes or services. Subsection 355-25(2) specifically excludes eight categories of items from being core activities, including for example: market research prospecting, exploring or drilling for minerals or petroleum for discovering or determining the size, quality or location of deposits management studies or efficiency surveys and   research in social sciences, arts or humanities. Supporting activities are defined in section 355-30 of the ITAA 1997 as activities directly related to core R&D activities. However, subsection 355-30(2) states that where an activity: produces goods or services is directly related to producing goods or services or is an excluded core activity under subsection 355-25(2) of the ITAA 1997 it will only constitute a supporting R&D activity where it is undertaken for the dominant purpose of supporting core R&D activities. Although the relevant R&D activities must generally take place in Australia, section 28D of the Industry Research and Development Act 1986 (IR&D Act) provides that in certain situations overseas expenditure may be eligible for the R&DTI (this requires approval by the Department of Industry, Innovation and Science).[52]
What tax relief is available under the R&DTI?	The amount of tax relief available under the R&DTI depends on the turnover of the relevant entity: for entities with turnover of less than $20 million per annum and not controlled by a tax exempt entity—a 43.5% refundable tax offset is provided for the first $100 million expended on eligible activities[53] and for all other entities—a 38.5% non-refundable tax offset for the first $100 million expended on eligible activities, with the ability to carry forward unused offset amounts.[54] This means that base rate entities (currently taxed at 27.5%) currently receive a greater benefit from the R&DTI than non-base rate entities (currently taxed at 30%).[55]
The R&DTI has an upper limit	Where the R&D expenditure amount exceeds $100 million, the offset is reduced to the company tax rate (meaning the standard tax deduction rates apply).[56]
The R&DTI is refundable for some entities	The R&DTI is refundable where an entity has aggregated turnover of less than $20 million—to the extent that the R&DTI reduces a firm’s taxable income to zero, only firms with aggregated turnover of $20 million or less will get the unused amount of the offset refunded to them.[57]

Source: Income Tax Assessment Act 1997.

Further information about the R&DTI can be found at the Australian Taxation Office website.

Integrity of the R&DTI

Due to the fact that the R&DTI can be used to reduce an entity’s tax liability, as well as generate a cash refund, there is an on-going risk that taxpayers and their advisors may seek to exploit the R&DTI for commercial advantage. This concern was summarised by the Review of the R&DTI as follows:

Refund payments under the Incentive represent increased compliance risks for administrators, as the self-assessment tax system can provide opportunities for fraud and exploitation from aggressive and speculative claims. Although tax returns can be amended following post-lodgement assessments, recovering refund payments can be challenging as companies may have already expended the money. The ATO and AusIndustry seek to address integrity concerns through risk profiling and compliance reviews, but the risks remain.[58]

Although the Review of the R&DTI concluded that most participants in the program are acting in accordance with the program rules, it also noted that the large increase in the number of claimants in recent years has led to a significant increase in compliance activity to ensure the integrity of the R&DTI.[59] Specifically, the ATO has:

• between 2015 and 2017, released five taxpayer alerts highlighting schemes being implemented that sought to ‘game’ the R&DTI[60]
• been engaged in a legal dispute with the Commonwealth Bank of Australia, as well as undertaking compliance action against a number of start-ups and tech firms including Airtasker and Digivizer[61]
• expressed concerns that advisory firms were encouraging companies to aggressively claim for work.[62] As a result the ATO entered into a number of enforceable voluntary undertakings with advisory firms in respect of structures and arrangements sold to clients[63] and
• obtained a Federal Court order imposing a $4 million promoter penalty in March 2018 against a Queensland tax advisor for promoting a tax exploitation scheme that encouraged clients to lodge overstated or ineligible claims for refundable R&D tax offsets.[64]

Therefore it would appear that the Government, the ATO and the Review of the R&DTI all share a common concern that the R&DTI has the potential to be exploited and its integrity could be strengthened.

Review of the R&D Tax Incentive

On 7 December 2015, Prime Minister Malcolm Turnbull launched the National Innovation and Science Agenda (NISA).[65] As part of the NISA, the Government requested that a panel consisting of Mr Bill Ferris AC (Chair Innovation Australia), Dr Alan Finkel AO (Chief Scientist) and Mr John Fraser (Secretary to the Treasury) be formed to identify opportunities to improve the effectiveness and integrity of the R&DTI, including by sharpening its focus on encouraging additional R&D spending.[66]

The Review was released on 28 September 2016,[67] with the Panel concluding:

... the [R&D] programme falls short of meeting its stated objectives of additionality and spillovers. There are a number of areas where improvements could be sought in order to improve the effectiveness and integrity of the programme and achieve a stronger focus on additionality.

Based on the best estimates of additionality and spillovers, the panel found that the programme could be better targeted. The areas of improvement identified in this review would be likely to generate greater benefit from the programme for the Australian economy.[68]

The Panel made six recommendations aimed at improving the integrity, effectiveness and the level of additionality from the R&DTI.

• Recommendation 1: Retain the current definition of eligible activities and expenses under the law, but develop new guidance, including plain English summaries, case studies and public rulings to give greater clarity to the scope of eligible activities and expenses[69]
• Recommendation 2: Introduce a collaboration premium of up to 20 percent for the non-refundable tax offset to provide additional support for the collaborative element of R&D expenditures undertaken with publicly-funded research organisations. The premium would also apply to the cost of employing new STEM PhD or equivalent graduates in their first three years of employment. If an R&D intensity threshold is introduced (see Recommendation 4), companies falling below the threshold should still be able to access both elements of the collaboration premium[70]
• Recommendation 3: Introduce a cap in the order of $2 million on the annual cash refund payable under the R&DTI, with remaining offset amounts to be treated as non-refundable and carried forward for use against future taxable income[71]
• Recommendation 4: Introduce an intensity threshold in the order of 1 to 2 percent for recipients of the non-refundable component of the R&DTI, such that only R&D expenditure in excess of the threshold attracts a benefit[72]
• Recommendation 5: If an R&D intensity threshold is introduced, increase the expenditure threshold to $200 million so that large R&D-intensive companies retain an incentive to increase R&D in Australia[73]
• Recommendation 6: The Government should investigate options for improving the administration of the R&DTI[74] and additional resourcing required to implement such enhancements. To improve transparency, the Government should also publish the names of companies claiming the R&DTI and the amounts of R&D expenditure claimed.[75]

Government response to the Review of the R&D Tax Incentive

In response to the Review of the R&DTI, the Government announced in the 2018–19 Budget that it was ‘reforming the Research and Development Tax Incentive (R&DTI) to reward additional investment in R&D while also ensuring the integrity and fiscal affordability of the R&DTI’.[76]

On 20 September 2018 the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 (the 2018 Bill) was introduced into Parliament, which amongst other things, sought to implement the R&DTI Budget announcement. On 18 October 2018, the Bill was referred to the Senate Economics Legislation Committee which released its final report on 11 February 2019.[77]

The Bill and the review recommendations

For ease of navigation, table 2: summary of main recommendation and proposed amendments to the R&DTI, highlights the main differences between the law as it currently stands, the key recommendations of the Review of the R&DTI and the amendments proposed in the Bills.

Please note the Bill currently before Parliament is largely the same as the 2018 Bill, with the most significant change being a modification to the thresholds for the R&D intensity premium (discussed below).

Table 2: summary of main recommendation and proposed amendments to the R&DTI

Existing law	Proposed law in 2018 and 2019 Bills	R&DTI Review recommendation
The expenditure threshold
The R&D expenditure threshold is currently $100 million.[78]	The R&D expenditure threshold will be increased to $150 million.	It was recommended that if an intensity threshold is introduced, the expenditure threshold should be increased to $200 million. It was considered this would incentivise further R&D by large firms.[79]
R&D Tax Offset for small R&D entities (aggregated turnover of less than $20 million)
The R&D tax offset rate for small R&D entities is generally 43.5 per cent.[80]	The R&D tax offset rate for small R&D entities will be their corporate tax rate plus 13.5 per cent.	This is not mentioned in the Review. However, it appears this amendment is aimed at restoring the R&D tax offset benefit for small R&D entities to the 13.5 per cent benefit that existed before the corporate tax rate was reduced to 27.5 per cent for base rate entities.
The R&D tax offset amount is fully refundable for small R&D entities – meaning they are entitled to a refund for any R&D tax offset they receive in excess of their income tax liability.[81]	The amount of R&D tax offset refund is capped at $4 million per annum for small R&D entities. Clinical trials do not count towards the $4 million cap and will continue to be fully refundable (subject to the $150 million expenditure threshold).	It was recommended a $2 million cap be introduced on the basis that the long-term cost of the R&DTI and that refundability provides fewer tangible benefits for SMEs with larger R&D expenditures.[82] There was no explicit mention of clinical trials being excluded from this cap.
R&D Tax Offset for large R&D entities (aggregated turnover of $20 million or more)
The R&D tax offset rate for large R&D entities is 38.5% and is non-refundable.[83]	The R&D tax offset rate for large R&D entities will be their corporate tax rate plus a premium based on their incremental R&D intensity.	It was recommended an intensity threshold requirement of 1 to 2 per cent would enhance additionality and generate spillovers.[84]

Source: Parliamentary Library.

Senate Economics Legislation Committee 2018 Inquiry

The 2018 Bill was referred to the Senate Standing Committee on Economics for inquiry (the 2018 Senate Inquiry). Details of the 2018 Senate Inquiry are at the inquiry homepage. The 2018 Senate Inquiry received 75 submissions and held public hearings in Canberra and Melbourne.[85]

The Committee did not endorse Schedules 1 to 3 of the 2018 Bill (relating to the R&DTI).[86] The Committee considered that the $4 million cap and the R&D premium intensity as currently drafted required further refinement. In particular, the Committee was concerned about the impact of the changes on existing investment decisions and the risk that the intensity premium could disadvantage businesses with Australian manufacturing compared to businesses that manufacture overseas:

In particular, the committee considers that some R&D entities affected by the introduction of the $4 million cap on the refundable tax offset have not had enough time to plan for the changes proposed in the bill, given that their investments have been in train for some time prior to the announcement of this measure ... On examination of the proposed $4 million cap on the refundable tax offset, the committee believes that it would benefit from some finessing to ensure that R&D entities that have already made investment commitments are not impeded unintentionally.

The committee also notes the concerns raised by participants in relation to the calculation of the proposed intensity premium. The committee shares participants' concerns that this intensity measure may have unintended consequences for larger R&D entities undertaking eligible R&D activities. In particular, the committee notes the possibility that businesses that manufacture in Australia may be disadvantaged compared with businesses that manufacture overseas. Further, the committee notes that the proposed intensity measure may also disadvantage those R&D entities that require large capital investment and operate on small margins.

The committee considers that, as currently drafted, the proposed intensity measure has possible unintended consequences that may disadvantage a range of Australian R&D entities. Therefore, the committee agrees that the intensity measure should be re-examined in order to ensure that Australian businesses are not unfairly disadvantaged.[87]

In conclusion, the 2018 Senate Inquiry recommended the Senate defer consideration of the bill until further examination and analysis of the impact was undertaken.

Differences between the Bill and the 2018 Bill

There are relatively few significant differences between the 2018 Bill and the Bill. The most notable change is modification to the R&D intensity premium. These changes are outlined and bolded in table 3: changes to the R&D intensity mechanism.

Table 3: changes to the R&D intensity mechanism

	2018 Bill		The Bill
Tier	R&D intensity range	Multiplier	R&D intensity range	Multiplier
1	Notional deductions representing up to and including 2 per cent of total expenses	4%	Notional deductions representing up to and including 4 per cent of total expenses	4.5%
2	Notional deductions representing greater than 2 and up to and including 5 per cent of total expenses	6.5%	Notional deductions representing greater than 4 and up to and including 9 per cent of total expenses	8.5%
3	Notional deductions representing greater than 5 and up to and including 10 per cent of total expenses	9%	Notional deductions representing greater than 9 per cent of total expenses	12.5%
4	Notional deductions representing greater than 10 per cent of total expenses	12.5%	N/A	N/A

Source: Item 9 of Schedule 1 to the Bill and item 9 of Schedule 1 to the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018.

Other differences between the 2018 Bill and the Bill include:

• the application of the amendments being delayed from income years starting on 1 July 2018, to income years starting on 1 July 2019 and
• clarifying that for the purposes of the General Anti-Avoidance rule in Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936), an R&D tax offset includes both refundable and non-refundable R&D tax offsets (including for the purposes of determining whether a tax benefit has been derived by a taxpayer).[88]

Current Committee consideration

Senate Economics Legislation Committee

On 6 February 2020, the Senate referred the Bill to the Senate Economics Legislation Committee for inquiry and report by 30 April 2020. The closing date for submissions is 6 March 2020. Details of the inquiry are at the inquiry homepage.

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) has drawn senators’ attention to its comments in relation to the 2018 Bill.[89] Specifically the Committee has previously raised concerns with:

• retrospectively applied proposed amendments in Schedule 2 of the Bill (please note that the Bill currently before Parliament is retrospectively applied to 1 July 2019):

Item 56 [of Schedule 2] provides that the proposed amendments under Part 1 of Schedule 2 apply to research and development tax benefits derived on or after 1 July 2018, and the proposed amendments under Part 2 of Schedule 2 apply in relation to assessments for income years commencing on or after 1 July 2018.

The committee requests the Treasurer's advice as to why it is necessary to retrospectively apply proposed amendments under Schedules 1 and 2 to income years commencing on or after 1 July 2018, or to tax benefits derived on or after 1 July 2018, and whether any persons would be detrimentally affected by the retrospective application.[90]

In response, the Assistant Treasurer noted that affected taxpayers had knowledge of the new reforms from the date of the Budget announcement, and that it was expected that taxpayers would only be expected to register for the program and lodge income tax returns under the reforms following the end of the income year, from 1 July 2019.[91]

The Committee asked for the information provided by the Assistant Treasurer to be included in the Explanatory Memorandum to the Bill and made no further comment on this issue.[92]

• broad delegation of administrative powers in Schedule 3 of the Bill:

Items 18 and 19 of Schedule 3 seek to remove the existing requirement that powers or functions only be delegated to SES or acting SES employees so as to allow the Board or committee to delegate functions or powers to a member of staff at any level.

The committee considers it may be appropriate to amend the bill to require that the Innovation and Science Australia Board, or a committee appointed to advise the board, be satisfied that persons performing delegated functions and exercising delegated powers have the expertise appropriate to the function or power delegated, and requests the Treasurer's advice in relation to this matter.[93]

In response, the Assistant Treasurer advised that the ISA Board, when exercising its powers to delegate functions to members of the SES, ‘satisfies itself that persons performing delegated functions have the expertise appropriate to the function delegated’ and that the functions proposed to be delegated under the amendment ‘include high-volume, low-risk functions such as granting extensions of time to submit applications and requesting information on an application’.[94] The Assistant Treasurer advised that he did not consider an amendment to the Bill was warranted.[95]

The Committee reiterated its preference ‘that delegations of administrative power be confined to the holders of nominated offices or members of the Senior Executive Service or, alternatively, that a limit is set on the scope and type of powers that may be delegated’ and advised that it considered it would be appropriate to amend the Bill to require that delegations may only be made to people with ‘the expertise appropriate to the function or power delegated’.[96]

Policy position of non-government parties/independents

Labor Party

On 10 December 2019, Brendan O’Connor and Clare O’Neil issued a media release stating that while Labor supports the intent of measures to maintain public confidence in the integrity and financial sustainability of the R&DTI, it was concerned that the Government had not heeded the concerns of the 2018 Senate Inquiry:

Last Parliament when the Government first sought to cut around $2 billion from R&D, it slipped the measure into a bill titled “Making Sure Multinationals Pay Their Fair Share of Tax in Australia” – a misnomer given a large number of firms affected are Australian start-ups and small and medium enterprises.
 
Labor supports the intent of measures to maintain public confidence in the integrity and financial sustainability of the R&D tax incentive, as per the Senate Economics Committee report.
 
However, the Government is yet to properly explain how the minor tweaks to the bill before Parliament have heeded the bipartisan concerns of the Senate Committee that the R&D measure “should be re-examined in order to ensure that Australian businesses are not unfairly disadvantaged”.[97]

The Australian Greens

While the Australian Greens’ position is not clear, Senator Peter Whish-Wilson was a member of the 2018 Senate Inquiry and Adam Bandt stated in April 2019 that the Greens new Science and Research policy would amongst other things improve the R&DTI by ‘reversing millions of dollars of government cuts and providing a 20% non-refundable tax offset for companies that hire STEM PhD students to work in their field of expertise’.[98]

Position of major interest groups

The below section provides an overview of a range of views expressed by a selection of stakeholders. Given that 75 submissions were made to the 2018 Senate Inquiry, this section is intended to provide a ‘snapshot’ of some key issues rather than a comprehensive summary of all stakeholders views.

Overview—the Bill is not well supported

Overall, the 2018 Bill did not have well-spread support, with criticism being levelled by industry, start-ups, the university sector and professional service firms. Given that the current Bill largely reproduces the 2018 Bill, it might be expected that this criticism will also be applied to the current Bill.

Broadly, the criticism of the Bill can be attributed to a general view that the Bill will discriminate against firms with domestic manufacturing activities, and that the Bill is focussed on reducing Government R&D spending, rather than redirecting the savings to more effective forms of R&D expenditure. This is best exemplified by the absence of a collaboration premium and the R&D expenditure threshold being increased to $150 million rather than $200 million, despite calls for both by industry and the Review of the R&DTI.[99]

The sentiment that the Government is implementing a ‘budget savings measure’ was captured by an article in The Australian Financial Review (AFR) in May 2018:

Treasury officials confirmed to The Australian Financial Review that the $2 billion in savings would be returned to the government as consolidated revenue. Those savings fly in the face of a government-commissioned report into the scheme in 2016 by Bill Ferris, Alan Finkel and John Fraser as part of Prime Minister Malcolm Turnbull's innovation policy.

While the trio warned about rorting of the R&D incentive – which the government has acted on – they also recommended the money should be redirected into direct grants to business to encourage commercialisation – which the government has ignored.[100]

This prompted the AFR to conclude following the April 2019 Budget:

Former Prime Minister Malcom Turnbull's innovation agenda has been all but airbrushed from history with the Morrison government cutting the research and development (R&D) tax incentive a further $1.35 billion over the budget forward estimates.

That takes the total cut out of the R&D tax incentive program - the Australian government's primary innovation funding mechanism - to more than $4 billion in the last two budgets.[101]

Therefore, although there appears to be a general consensus about the need to strengthen the integrity of the R&DTI, there is a strong divergence in views between the Government and stakeholders as to where the savings from the Bill should be directed.

The Bill has been criticised for not responding to stakeholder concerns

There is a general view amongst stakeholders that the Bill has failed to adequately address concerns raised by stakeholders and the 2018 Senate Inquiry. On this point, advisory firm Deloitte have been highly critical of the Bill stating:

Disappointingly, the Government appears to have disregarded the recommendations of a bipartisan Senate Committee.

The Bill remains intact with the exception of some minor tweaks to the premium tier offsets in the controversial intensity threshold, which is likely to result in worse outcomes than originally envisaged for most R&D claimants.[102]

Further, Deloitte has expressed the view that the changes to the intensity premium have failed to address concerns that the Bill has the potential to be discriminatory:

Indeed, much of the debate in the public hearings of the Senate Committee’s review of the original Bill centred on the complexity and discriminatory nature of these proposed measures.

In particular, the original R&D intensity measures were recognised as discriminatory where there are inherent differences in R&D intensity across industries. The original proposals had significant potential negative impacts on businesses with large operating costs and disadvantaged companies that chose to retain manufacturing activities in Australia over those that shifted manufacturing offshore.

Disappointingly, the measures in the revised Bill are altered in a very minor way, and will either provide a similar or worse net tax benefit than the measures contained in the original Bill...[103]

Summary of stakeholder views expressed during the 2018 Senate Inquiry

Given that the Bill is relatively unchanged, the majority of stakeholder views expressed in relation to the previous Bill continue to be relevant to the current Bill.

A consistent theme raised by stakeholders during the Senate Inquiry was the need for certainty around R&D policy. On this point, stakeholders expressed the view that a number of aspects of the Bill may reduce certainty—in particular, the following general points were identified:

• the introduction of the $4 million annual refund cap for small companies was not well supported and may reduce certainty for future investment, particularly where investment decisions had been made based on the existence of no refund cap
• there were concerns that the $150 million expenditure threshold on large companies may have adverse economic consequences, and that it may reduce the ability of large businesses to be able to continue to access meaningful R&D tax incentives
• the Government should implement a collaboration premium as recommended by the Review of the R&DTI and
• the changes to the R&DTI would adversely impact on R&D expenditure and Australia’s attractiveness as an R&D location. It has been reported that a number of businesses have stated that they may need to outsource their R&D activities to countries with more favourable R&D tax arrangements.[104]

The views of selected stakeholders on these issues are captured in table 4: selected stakeholder submissions to the 2018 Senate Inquiry. There appears to be a consensus view held by stakeholders that the entire response to the Review of the R&DTI falls short of what is needed due to:

• the proposed design of the R&D intensity premium
• the failure to adopt a collaboration premium and
• Budget savings not being redirected into the R&DTI program.

Table 4: selected stakeholder submissions to the 2018 Senate Inquiry

Submission	Proposal	Stakeholder views
Business Council of Australia	Collaboration premium	Although recognising the importance of the Budget savings from the Bill, the BCA recommended that these savings should be redirected to promoting innovation and stimulating business R&D. For example, the BCA called for the introduction of a collaboration premium of up to 20 per cent on non-refundable tax offsets, stating that this could incentivise collaborations between industry, public research organisations and universities.
Cochlear	Competitive grants or collaboration premium	Cochlear submitted that the Budget savings from the Bill could be redirected to other programs or incentives that support Australian R&D. For example, the government could broaden the suite of incentives to include competitive grants programs and/or introduce a collaboration premium of up to 20 per cent to incentivise collaboration between industry and public research organisations and universities.
University of Melbourne, GlaxoSmithKline	Collaboration premium	Called on the Government to introduce a collaboration premium of up to 20 per cent.
PWC	Collaboration premium	PWC recommended introducing a collaboration premium of up to 20 per cent, but suggested 10 per cent may be more suitable to maintain integrity and given current budgetary challenges.
Corporate Tax Association	Intensity premium	In light of more generous R&D tax reform in the UK and USA, the intensity premiums should be made more generous and simplified.
Chartered Accountants Australia & New Zealand (CAANZ)	Intensity premium	The proposed R&D intensity mechanism, if implemented as drafted, would likely have a profound and adverse impact on participation in the R&DTI, leading to a further decline in business expenditure on R&D.
BDO	Intensity premium	Intensity can vary significantly depending on the industry, resulting in a disparity in the level of support provided, particularly for those in low-margin, high-volume industries such as agriculture, manufacturing and mining.
GSK, CSL, Cochlear, Deloitte, PWC	Intensity premium	The Bill is likely to discriminate against firms with Australian based non-R&D expenditure (compared with those who have outsourced people functions), while smaller firms and low-margin businesses will receive a smaller net benefit under the proposals than larger businesses.
Deloitte, Cochlear	Expenditure threshold cap	This cap may prevent a handful of high intensity companies from accessing the benefits of the higher rates offered by the R&DTI intensity premium. However, both CSL and Cochlear noted that increasing the cap from $100 million to $150 million will have some benefit. Cochlear also noted that they had hit the existing $100 million cap in 2017–18, meaning they will be more likely to place new R&D offshore, leading to IP moving offshore, more tax paid offshore and high paying R&D jobs being located outside Australia.
PWC	Adverse impacts	The proposed changes would have a negative impact and discourage further R&D investment, with businesses more likely to look for more favourable options offshore.
Western Australian Government	Adverse impacts	Industry has raised concerns with the WA Government about the Bill and the flow-on impact that reduced R&D spending in WA will have on smaller manufacturing and supply companies (for example those servicing the mining industry).
Deloitte, BDO, KPMG, BioMelbourne Network, CAANZ	Insufficient benefit and incentive	The proposed measures are likely to result in an irreversible decline in the number of Australian based R&D projects as the measures will only result in a 4 per cent net benefit. On this point, a number of stakeholders including KPMG, CAANZ and BioMelbourne Network noted that in contrast, New Zealand offers far more generous R&D benefits than Australia.
Universities Australia	The Bill is unlikely to address Australia’s declining R&D expenditure	Stakeholders in the University sector submitted that any savings from amendments to the RD&TI should be used to invest in improving Australia’s research, development and innovation system through targeted direct incentives and the introduction of a collaboration premium to the R&DTI.
BioMelbourne Network	Clinical trials exemption definition needs to be reviewed	Exempting clinical trials from the $4 million cap is welcome, but the definition is too narrow and skewed towards pharmaceutical products. Stakeholders generally suggested extending the definition, including consideration of pre-clinical trials and adopting the World Health Organisation (WHO) definition.
BioMelbourne Network, PwC, Deloitte, CAANZ	The Bill may result in increased compliance costs, red tape and uncertainty	Compliance costs have increased due to uncertainty around the R&DTI in light of ATO compliance action. Furthermore, there appears to have been an increase in ‘red tape’. Some stakeholders considered that the proposed changes will only increase complexity and compliance costs, particularly as a result of having to apply new provisions around intensity premiums and clinical trials.
CAANZ	The definition of small R&D entity	CAANZ submitted that the R&D definition of small and large business is now outdated as the turnover threshold for “base rate entities” from 2018–19 is now at $50 million for corporate tax purposes, while for R&D it is at $20 million. CAANZ contended this lack of alignment will cause ‘a mismatch, complexity and unintended interactions with the corporate tax rates’.

Source: Submissions made to the 2018 Senate Inquiry.

Concerns raised in relation to the R&D intensity premium

A number of stakeholders also expressed concern with the proposed intensity premium. A common theme raised was that its design could be discriminatory, distortionary and not have any meaningful positive impact for a large number of Australian businesses. These concerns appear to be relevant to the both the thresholds in the 2018 Bill and the new thresholds proposed in the current Bill. These concerns are outlined in Table 5: summary of stakeholder concerns with the R&D intensity premium.

Table 5: summary of stakeholder concerns with the R&D intensity premium

Submission	Proposal	Stakeholder views
GSK, CSL, Cochlear, Deloitte, BioMelbourne Network, PwC	Favours non-Australian activities (such as marketing, distribution or manufacturing)	A general concern exists that calculating the premium based on R&D expenditure as a percentage of total expenditure (including capital expenditure) is likely to be disadvantageous to companies that have high non-R&D costs (such as sales, marketing and manufacturing). For example, GSK noted that they will have a lower intensity premium than a rival business with the identical R&D expenditure where that rival business has no Australian manufacturing activities.[105] It was also submitted the intensity premium may create an unintended consequence of providing greater tax incentives to entities that choose to base manufacturing functions overseas. This issue was succinctly summarised by CSL as follows: Companies which invest significantly in R&D but are also large Australian manufacturers and employers will have a lower ‘intensity’ compared to a company which only conducts R&D in Australia and manufactures offshore or, is engaged in an industry which does not have high raw material and production costs (for example digital and online). A good example is the comparison between CSL and any of the multinational automanufacturers which have now shut down their Australian manufacturing but retained a level of R&D in Australia. Under above formula, that business model will have a higher ‘R&D intensity’ and that company will receive a much greater tax concession than a manufacturer/employer like CSL.[106] The changes to the Bill from the 2018 Bill do not appear to specifically address these concerns.
BDO, BioMelbourne Network, Deloitte	Inconsistent across sectors	Intensity can vary significantly depending on the industry, resulting in a disparity in the level of support provided, particularly for those in low-margin, high-volume industries such as agriculture, manufacturing and mining.
Corporate Tax Association, KPMG	The premium rate	In light of more generous R&D tax reform in the UK and USA, the intensity premiums should be made more generous. On this point, KPMG submitted that: In terms of the overall RDTI policy direction, our fear is that the proposed intensity measure may accelerate the current negative trajectory in business expenditure on R&D, and that the 4% rate would not be sufficient to represent a genuine incentive to undertake additional R&D. International experience, and indeed Australia's prior experience, indicates that a base rate of at least 7.5% needs to be in place in order for business to regard it as a genuine incentive.[107]
CAANZ PWC	Overall negative impacts and unlikely to add any meaningful benefit	The proposed R&D intensity mechanism, if implemented as drafted, would likely have a profound and adverse impact on participation in the R&DTI program, leading to a decline in business expenditure on R&D. On this point, CAANZ stated that: The proposed R&D Premium’s entry level R&D benefit rate of 4c/$ is an exercise in futility and a patent disregard of the reality of the globalised world in which we live and conduct business, in our view. Chartered Accountants ANZ understands that this rate, if enacted, would be amongst the lowest R&D offerings by any country in the world. In OECD countries, the mean R&D tax subsidy rate for large companies is estimated at 10c-13c/$.[108] It was also stated by CAANZ that member analysis and feedback indicates that most companies are likely to have an R&D intensity in the range of 0%-1%. As such, not many companies will be eligible to access the second incremental rate of 8.5c/$.[109]
BDO, Deloitte	Too complex	The intensity premium is highly complex and will increase compliance costs for entities in calculating their R&DTI entitlement. The effect of these additional compliance costs may diminish the overall effectiveness of the R&DTI.
KPMG	Denominator	The denominator for the intensity premium (that is, total expenses) should be adjusted to exclude certain costs such as financing costs, and costs that are treated as notionally ineligible deductions for the purpose of calculating the R&DTI.

Source: Submission made to the 2018 Senate Inquiry.

Concerns raised by the university sector

The university sector also appears to be generally concerned about the broader impacts of the Bill. In particular, Universities Australia and the University of Melbourne made the following points:

• Australian businesses are much less likely to conduct R&D activity with the research sector than businesses in other OECD nations. A collaboration premium would provide an incentive for businesses to engage research institutions. This would help ensure an optimal return on the public investment and advance the aims articulated in the NISA[110]
• a collaboration premium is needed—introduction of a premium rate to the R&DTI for businesses that collaborate with universities and publicly funded research agencies would encourage business to access expertise and resources inside these institutions, which would have the effect of significantly increasing the spillovers associated with both public sector and business R&D[111] and
• there is a general concern that Government is not supporting collaboration—specifically, Universities Australia stated that it was concerned by the disconnect between government policy that encourages business and universities to work more closely together yet provides little support to businesses who wish to take advantage of Australia’s world-leading university R&D capability. Universities Australia proposed a collaboration premium to address this.[112]

It is worth noting that both the Government and Parliamentary Budget Office (PBO) have queried whether a collaboration premium would generate additional R&D activity or merely result in a redistribution of existing R&D activities. This is discussed in more detail in the ‘Key provisions and issues’ section of this Digest under the heading ‘Key issue: collaboration premium’.

Concerns raised by the mining sector

Some elements of the Bill do not appear to be well supported by the mining industry. In particular, specific concerns have been raised about the potential impact of the 2018 Bill on the viability of Lithium Valley.[113]

Table 6: summary of stakeholder concerns raised by the mining sector

Stakeholder	Stakeholder view
Association of Mining and Exploration Companies	Highly critical of the Bill and submitted that the $4 million cap should be removed. They also submitted that: without an uncapped R&DTI, a number of projects may not have progressed to their current advanced stage, or would have been significantly delayed due to difficulties raising rare risk capital investment from alternative sources the $4 million cap will create a potential barrier or disincentive to small start-ups and emerging mining companies that have limited access to traditional finance and there is a strong business case to ‘carve out’ rare earths, lithium, strategic and battery related minerals from the proposed cap as the future economic and social dividends of doing so far outweigh the direct impact on the Commonwealth Budget.
Newmont Australia	Stated that the changes to the R&DTI would have a significant impact on their gold mining business and their international competiveness.
The Chamber of Minerals and Energy of Western Australia and Northern Minerals	Highly critical of the changes and the impact on the Browns Range Heavy Rare Earth Project, stating that there would be an estimated $12.3 million shortfall in the financing of the project in 2018–19 – as a result this would require Northern Minerals to source alternative financing from overseas investors.
Lithium Australia	Expressly asked the Government to either remove the proposed $4 million cap on R&D rebates or exclude from the cap R&D spending associated with projects that support the development of critical raw materials and those associated with energy production and efficiency.

Source: Submission made to the 2018 Senate Inquiry.

Following the 2018–19 Budget announcement, a number of media articles contended that the proposed changes to the R&DTI could adversely impact on the mining sector more generally.[114]

Financial implications

As stated at page 3 of the Explanatory Memorandum to the Bill, it is estimated that the amendments will have a gain of $1.8 billion to the Budget over the current forward estimates period in fiscal terms:

Table 7: financial implications of the Bill

Financial year	Budget savings from current Bill
2019–20	$175 million
2020–21	$435 million
2021–22	$585 million
2022–23	$570 million

Source: Explanatory Memorandum, Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019, p. 3.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible because it does not raise any human rights issues.[115]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considers that the Bill does not raise human rights concerns.[116]

Key issues and provisions

As discussed in the ‘Position of major interest groups’ section of this Digest, the key issues raised in relation to the Bill include:

• does the Bill, in its current form, give effect to the Government’s intended purposes, and are they still consistent with the NISA and Review of the R&DTI?
• does the Bill provide a meaningful incentive for businesses to locate R&D activities in Australia?
• whether the changes to the Bill are likely to address stakeholder concerns about who will benefit from the premium
• will the Bill, and more specifically, the intensity premium, disadvantage certain businesses?
• is the definition of clinical trials suitable and what activities are excluded from this definition?
• what is the effect of adopting a $150 million expenditure cap rather than the recommended $200 million cap?
• will the Bill be effective in improving the overall integrity of the R&DTI?
• do the changes to the Bill respond to concerns of stakeholders and the 2018 Senate Inquiry?

Overview of the Bill

Given the significant amount of publicly available information, including the Explanatory Memorandum and Final Report of the 2018 Senate Inquiry, this section only provides an overview of the key elements of the Bill contained in each Schedule. Readers are directed to the Explanatory Memorandum for a more detailed explanation of the proposed legislative provisions.

Schedule 1: better targeting the R&DTI

The major changes proposed by Schedule 1 of the Bill are to:

• introduce a $4 million refundability cap
• exempt R&D expenditure on clinical trials from the $4 million refundability cap
• change the R&D tax offset rates, including implementing an R&D intensity premium for large R&D entities and
• permanently increase the R&DTI expenditure threshold cap from $100 million to $150 million.

Key provision: changes to the R&D tax offset rate

Presently, the R&D tax offset rate generally applies at a rate of 43.5 per cent to small R&D entities, and 38.5 per cent to large R&D entities.[117] Broadly, the Bill proposes the following changes:

• small R&D entities will be entitled to an R&D tax offset rate of their company tax rate plus 13.5 percentage points and
• large R&D entities will be entitled to an R&D tax offset rate of their company tax rate plus an amount calculated with reference to a proposed intensity premium.

Small R&DTI entities

Item 6 of Schedule 1 amends subsection 355-100(1) of the ITAA 1997 by stating that the R&D tax offset will apply to small R&D entities at a rate of 13.5 percentage points plus an entity’s corporate tax rate. This means that entities with less than $20 million turnover will have an R&D tax offset rate of:

• 41 per cent in 2018–19 and 2019–20
• 39.5 per cent in 2020–21 and
• 38.5 per cent from 2021–22 onwards.[118]

However, where a small R&D entity is controlled by one or more exempt entities it will be treated as a large R&D entity.[119]

Some stakeholders submitted to the 2018 Senate Inquiry that this amendment creates a reduced incentive for small R&D entities to engage in R&D activities,[120] as the benefit of the R&DTI will be reduced from between 16 and 18.5 per cent to 13.5 per cent.[121] However, it should be noted that prior to the reductions in corporate tax rates for base rate entities, small R&D entities only received a 13.5 per cent R&D tax offset uplift.[122] As such, the proposed change restores the R&D tax offset rates to the situation that existed prior to the recent corporate tax rate reductions (with a new $4 million refundability cap).

Large R&DTI entities

The changes to the R&D tax offset for large entities as presented in the Bill may be difficult to follow as they do not sequentially flow—however, readers should be able to follow the amended legislation provided they read the section to its conclusion.[123] Items 7 and 9 of Schedule 1 of the Bill make the following changes:

• item 7 resets the R&D tax offset rate to the company tax rate (either 30 per cent or 27.5 per cent depending on the relevant company’s turnover) for the below entities:
  • small R&D entities that are controlled by one or more exempt entities and
  • all other entities that do not satisfy the small R&D entity test—that is, large R&DTI entities
• item 9 of the Bill then increases the R&D tax offset by adding an R&D intensity premium in accordance with the percentages listed in Table 8: proposed R&D intensity premium tiers and thresholds.

Table 8: proposed R&D intensity premium tiers and thresholds

Tier	R&D intensity range	Intensity premium
1	Notional deductions[124] representing up to and including 4 per cent of total expenses	4.5 percentage points
2	Notional deductions representing greater than 4 per cent and up to and including 9 per cent of total expenses	8.5 percentage points
3	Notional deductions representing greater than 9 per cent of total expenses	12.5 percentage points

Source: Explanatory Memorandum, Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019, p. 13.

The entity’s R&D intensity premium is the proportion of the entity’s total expenses spent on R&D expenditure. For example, if an entity has total expenses of $1 billion and R&D expenditure (notional deductions) of $40 million, then it has an R&D intensity of 4 per cent, being ($40 million divided by $1 billion).[125]

It should also be noted that the intensity premium operates cumulatively, that is, the taxpayer must work out the how much of their R&D expenditure is in each tier, and multiply that expenditure by the intensity premium amount.

The operation of the intensity premium is illustrated in an example on the following page from the Explanatory Memorandum.

Example: R&D tax offset for large R&D entities Contrast Industries has notional deductions of $160 million in the 2019-20 income year, exceeding the $150 million expenditure threshold. In the same income year, Contrast Industries had expenditure of $1 billion. Its aggregated turnover exceeds $50 million, meaning it is subject to the 30 per cent corporate tax rate. Contrast Industries has an R&D intensity of 15 per cent ($150 million divided by $1 billion). The portion of the R&D tax offset calculated in relation the excess $10 million is calculated separately. Contrast Industries’ R&D tax offset for the income year is calculated as follows: Tier Intensity range R&D premium Notional deductions applied Offset amount Tier 1 0-4% 4.5% $40m $13.8m Tier 2 4-9% 8.5% $50m $19.25m Tier 3 >9% 12.5% $60m $25.5m Excess N/A Nil $10m $3m     Totals: $160m $61.55m

Source: Explanatory Memorandum, Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019, p. 13–4.

Item 12 inserts proposed section 355-115 into the ITAA 1997 and enables an entity to calculate its ‘total expenditure’. It is proposed that an entity’s total expenditure will be, broadly, the entity’s total expenses as reported in its financial statements, including the entity’s R&D notional deductions.[126] An entity’s total expenditure is based on accounting standards set by the Australian Accounting Standards Board (AASB) or in accordance with commercially accepted accounting principles.[127]

Key issue: accessing tiers 2 and 3

As noted in the key stakeholder discussion, there is significant concern amongst industry that the majority of taxpayers will fall within tier 1, meaning that their R&D tax offset rate will effectively be reduced from 38.5 per cent to between 32 per cent (where they are a base rate entity that is not a small R&D entity) and 34.5 per cent for the 2019–20 income year. Further, it may be argued that the streamlining of the tiers from those proposed in the 2018 Bill, including extending tier 1 to entities that have an intensity range of 2 to 4 per cent, may result in more entities falling within tier 1, further reducing the available benefit of the R&DTI.

It is not clear whether these changes will address concerns expressed during the 2018 Senate Inquiry about the premium disadvantaging businesses with significant Australian non-R&D functions (by capturing these entities) or exacerbate these concerns (by providing a greater intensity premium where they fall within tiers 2 or 3).

As such, Parliament would benefit significantly by analysis being provided as to where the range of R&DTI claimants currently sit within these intensity ranges, so as to allow greater scrutiny of the practical effect of these changes.

Key provision: reducing the refundability of the R&DTI

Presently, a small R&D entity is entitled to a refundable R&D tax offset.[128] Conversely, a large R&D entity will not be entitled to a refundable R&D tax offset, but will be able to carry forward the unused portion of the offset to future years.[129]

Item 4 of Schedule 1 of the Bill modifies the refundability status of R&DTI tax offsets for small R&D entities by implementing a $4 million refundability cap. This is achieved by inserting proposed subsection 67-30(1A) of the ITAA 1997, which broadly provides that where the amount of the tax offset exceeds $4 million, that amount will not be refundable.

However, proposed subsections 67-30(1A) and (1B) seek to exclude from the $4 million cap, tax offset amounts attributable to R&D activities relating to clinical trials that are registered under proposed paragraph 27A(1)(c) of the Industry Research and Development Act.[130] Clinical trial is defined in proposed subsection 67-30(1C) of the ITAA 1997:

A clinical trial is a planned study of the safety or efficacy in humans of an intervention (including a medicine, vaccine, treatment, diagnostic procedure or medical device) with the aim of achieving at least one of the following:

        (a) the discovery, or verification, of clinical, pharmacological or pharmacodynamic effects;

        (b) the identification of adverse reactions or adverse effects;

        (c) the study of absorption, distribution, metabolism or excretion.

This definition is similar to the definition of clinical trials adopted by the Therapeutic Goods Administration (TGA) and it therefore seems logical to tie the definition of a clinical trial for tax purposes to the definition adopted by the TGA.[131]

Notwithstanding this, as noted above, some stakeholders have criticised this definition as being skewed towards the pharmaceutical sector and for being narrower than the World Health Organisation’s definition of a clinical trial, being:

any research study that a clinical trial is any research study that prospectively assigns human participants or groups of humans to one or more health-related interventions to evaluate the effects on health outcomes. Interventions include but are not restricted to drugs, cells and other biological products, surgical procedures, radiological procedures, devices, behavioural treatments, process-of-care changes, preventive care, etc.[132]

The University of Melbourne contends that proposed subsection 67-30(1C) of the ITAA 1997 has the effect of limiting clinical trials to therapeutic devices and drugs and excluding other clinical interventions such as cognitive behaviour therapy and music therapy trials. Further, the University of Melbourne contends that a broader definition would bring Australia into line with international practice.[133] GSK also contended that the definition should be modified to insert the words ‘but not limited to’ so as to future proof the definition for technological change.[134]

Key issue: collaboration premium

A key issue raised by stakeholders has been the decision to not include a collaboration premium as recommended by the Review of the R&DTI.

It appears that the Government’s decision is primarily motivated by a concern as to whether the gains from such a premium would be material. This is explained in more detail in the Regulatory Impact Statement:

The collaboration premium may be limited in its ability to effectively increase the level of collaboration. While the collaboration premium would reward companies for collaborating with publicly funded research organisations, factors such as the differing objectives of industry and universities in conducting research and poor mobility between academia and businesses would remain significant inhibitors of collaboration. Further, as with the R&DTI generally, additional support would be offered for collaborative R&D activity already underway at no additional benefit to the taxpayer. A collaboration premium also creates the potential for distortionary impacts and rorting. For example, a company with the internal capability to undertake R&D may choose to outsource the activity simply to receive a higher benefit rate. This would not be an efficient allocation of resources.[135]

As part of the PBO’s 2019 Post-election Report, the PBO costed the ALP’s election commitment to introduce a 10 per cent premium applied to expenditures for R&D undertaken in collaboration with public universities or Commonwealth Government‐funded research organisations (such as CSIRO), and to the costs of employing new science, technology, engineering and mathematics (STEM) PhD or equivalent graduates in their first three years of employment to conduct R&D.[136]

In costing the proposal, the PBO assumed that while the proposal would increase collaboration, this would not represent new R&D expenditure, but rather a shift from non‐collaborative to collaborative R&D expenditure.[137] Further, the PBO stated:

The fact that Australia has one of the lowest rates of collaboration in the Organisation for Economic Cooperation and Development would suggest that there is significant room to increase business spending on collaborative R&D. However this increase would be somewhat limited by non‐financial factors preventing greater collaboration. In the Australian Bureau of Statistics (ABS) publication Innovation in Australian Business (ABS Cat. No. 8158.0), innovative businesses list numerous non‐financial reasons for this low amount of collaboration, such as lack of time or expertise. Less than half of businesses that perceive a barrier to collaboration list financial factors as a reason.[138]

Key provision: increasing the R&D expenditure cap

Item 11 of Schedule 1 replaces current subsection 355-100(3) of the ITAA 1997 to permanently increase the R&DTI expenditure threshold cap from $100 million to $150 million. This means that an entity can apply the R&D tax offset (that is, the corporate tax rate plus the marginal intensity premium) to an amount of up to $150 million of eligible R&D expenditure. Amounts exceeding $150 million will continue to be subject to the normal deduction rate, that is, the entity’s corporate tax rate.

Conclusion

It is open to debate whether Schedule 1 of the Bill gives effect to overall recommendations of the Review of the R&DTI. As discussed above, in its current form, the Bill does not redirect Budget savings back into the R&DTI program, may reduce incentives to invest in Australian R&D, and may potentially discriminate against businesses with large non-R&D Australian based expenditure. As a result, this has prompted a large number of stakeholders to conclude that the primary purpose of the Bill is to generate Budget savings, rather than sharpen and better target the R&DTI.

Given the Bill does not incorporate the 2018 Senate Inquiry’s recommendations or directly address a number of issues consistently raised by stakeholders, Parliament would benefit greatly from an increased level of transparency around some of the key policy decisions, including:

• why the intensity premium has been designed as proposed under the Bill and whether stakeholder concerns that the premium will disadvantage businesses with Australian operations are accurate
• whether the increased R&D tax offset rates for base rate entities under the existing R&DTI (as a result of the reduction in corporate tax rates) have had any meaningful impact on R&D expenditure by base rate entities—this will assist in assessing stakeholder claims about the impacts on small business and start-ups of reducing the R&DTI offset amounts
• the number of businesses expected to have an increased or decreased R&D tax offset rate as a result of the Bill and
• a breakdown of the Budget savings attributable to changing the R&D tax offset rates as compared to the limit on the refundability of the R&DTI.

Schedule 2: enhancing the integrity of the R&DTI

Schedule 2 of the Bill is primarily concerned with enhancing the integrity of the R&DTI program. The Bill seeks to achieve this by:

• confirming that the General Anti-Avoidance Rule in Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) includes schemes that have the sole or dominant purpose of obtaining all or part of an R&D tax benefit
• consolidating and remaking the uniform clawback rules to ensure an entity does not claim a ‘double benefit’ in relation to an R&D activity and
• amending the rates at which the uniform clawback, balancing adjustment and feedstock adjustment rules apply. As noted by the Explanatory Memorandum, these changes are necessary in light of the proposed amendments to the rate of the R&D tax offset.[139]

The uniform clawback, balancing adjustment and feedstock adjustment rules are highly technical and appear to be generally uncontroversial. As such, this Digest provides a high level overview of the current operation of the rules and a summary of the proposed changes. Readers requiring further information are directed to Chapter 2 of the Explanatory Memorandum, which contains a number of worked examples and a detailed plain English explanation.

Proposed changes to the general anti-avoidance rule

The Bill explicitly confirms that the General Anti-Avoidance Rule in Part IVA of the ITAA 1936 includes a scheme that has the sole or dominant purpose of obtaining all or part of an R&D tax benefit. This means the Commissioner of Taxation (Commissioner) can deny all or part of an R&D tax offset obtained by a taxpayer who has entered into an artificial or contrived arrangement for the sole or dominant purpose of obtaining the R&DTI tax offset.[140]

The proposed changes to the General Anti-Avoidance Rule are uncontroversial, and well explained at pages 24 and 25 of the Explanatory Memorandum to the Bill.

Changes to the uniform clawback, feedstock adjustment and balancing adjustment rules

What is the uniform clawback rule?

Subdivision 355-G of the ITAA 1997 contains a set of rules that apply to prevent an entity from obtaining multiple benefits in relation to an R&D activity. Broadly, where an entity receives a government recoupment (such as a grant or reimbursement) for R&D expenditure that is also eligible for the R&D tax offset, a 10 per cent tax will be imposed on the amount of recoupment. As noted by the Explanatory Memorandum, the 10 per cent tax rate was initially chosen as a simplicity measure based on the assumptions that the R&D entity was entitled to 40 per cent R&D tax offset rate for large R&D entities (rather than the 45 per cent for small R&D entities) and that a fixed 30 per cent corporate tax rate applied to all R&D entities.[141]

Example 2.1 of the Explanatory Memorandum provides the following illustration of the clawback rule:

Cross Innovations receives a $1 million grant to undertake R&D activities. In addition to the grant, Cross Innovations must spend an additional $1 million of its own money as a condition of the grant. Cross Innovations receives an offset of $870,000 (applying the 43.5 per cent offset rate to the $2 million expenditure). Cross Innovations would have otherwise been entitled to a deduction worth $550,000 at the 27.5 per cent corporate tax rate. Therefore, the incentive component of the offset is the difference of $320,000.

In the same income year, the recoupment rules clawback only 10 per cent of the total $2 million spent under the terms of the grant, which is $200,000. Cross Innovations keeps the remaining $120,000 of the offset incentive. However, the grant alone is intended to constitute sufficient incentive without the additional $120,000 from the R&D tax incentive.[142]

Pages 19 to 20 of the Explanatory Memorandum contain a more detailed explanation of the clawback rule.

What are feedstock adjustments?

Broadly, feedstock refers to goods, material or energy (feedstock inputs) that is transformed or processed during R&D activities to create one or more tangible product (feedstock outputs).[143] As feedstock expenditure may attract the R&DTI, special rules exist in subdivision 355-H of the ITAA 1997 to ‘reverse’ any double benefit obtained by taxpayers. As explained by the Explanatory Memorandum:

The intended net outcome is that the Incentive is effectively enjoyed on feedstock expenditure to the extent that it is not offset by feedstock revenue. This is achieved by basing the adjustment on the lesser of feedstock expenditure and feedstock revenue.[144]

The calculation of the adjustment amount is quite complex, but as explained in the Explanatory Memorandum, it broadly seeks to recoup roughly one third of the lesser of feedstock expenditure or feedstock revenue, which is intended to recoup 10 percentage points of the R&DTI (based on a standard 30 per cent corporate tax rate).[145] The adjustment is implemented by including one third of the lesser of feedstock expenditure or feedstock revenue in the R&D entity’s assessable income.[146]

Pages 20 to 21 of the Explanatory Memorandum contain a detailed explanation of the feedstock adjustment rules.

What are balancing adjustments?

Where an entity stops holding a depreciating asset, they are required for tax purposes to compare the economic or market value of the asset (known as its termination value) with its written down or book value (known as its adjusted value).[147] Where the termination value exceeds the adjusted value, this amount is included in an entity’s assessable income; where the termination value is less than the adjusted value, a tax deduction for the difference is allowed.[148] As stated in the Explanatory Memorandum, the purpose of these rules is to ensure an entity’s overall tax position reflects the true decline in value of that asset.[149]

Where a depreciating asset is held for R&D purposes, an R&D entity can obtain an R&D tax offset for the decline in value of that asset.[150] Paragraph 2.14 of the Explanatory Memorandum contains the following summary of the rates at which the balancing adjustment applies for an R&D asset:

· for an R&D asset held only for R&D purposes where the balancing adjustment amount is included in the R&D entity’s assessable income – the amount is generally increased by one third (subsection 355-315(3));

· for an R&D asset held only for R&D purposes where the balancing adjustment amount is allowed as a deduction – the deduction is included in the R&D entity’s R&D tax offset calculation (subsection 355-315(2));

· for an R&D asset held partially for R&D purposes where the balancing adjustment amount is included in the R&D entity’s assessable income – the part of the amount attributable to the asset’s R&D use (the R&D component) is generally increased by one third (subsection 40-292(4)); and

· for an R&D asset held partially for R&D purposes where the balancing adjustment amount is allowed as a deduction – the R&D component of the amount is generally increased by one third or (for small R&D entities) or one half (subsection 40‑292(3)).[151]

Similar to the clawback and feedstock rules, the balancing adjustment rules rely on an approximation of the incentive component of an entity’s R&D tax offsets.[152]

Proposed changes to the rates of clawback, feedstock and balancing adjustments

The proposed amendments to the clawback, feedstock and balancing adjustment rules are usefully summarised at pages 23 and 24 of the Explanatory Memorandum and replicated below in table 9: summary of changes to clawback, feedstock and balancing adjustment rates.

Table 9: summary of changes to clawback, feedstock and balancing adjustment rates

New law	Current law
The uniform clawback rule
Recoupment amounts and feedstock adjustments give rise to an amount of assessable income equal to the grossed-up value of the incentive component of associated amounts of R&D tax offset.	Recoupment amounts are subject to a standalone tax of 10 per cent.
	One third of feedstock adjustments are included in an R&D entity’s assessable income.
An amount is included in the assessable income of the R&D entity that received or is entitled to the R&D tax offset in relation to a recoupment amount or feedstock revenue received by a related entity.	In cases involving related entities, the entity receiving a recoupment is subject to recoupment tax.
	In cases involving related entities, the R&D entity entitled to the R&D tax offset is subject to a feedstock adjustment if the related entity receives feedstock revenue.
Balancing adjustments for R&D assets
The R&D entity’s assessable income is increased by an amount equal to the grossed-up value of the incentive component of the associated amounts of R&D tax offset.	For an R&D asset held only for R&D purposes where the balancing adjustment amount is included in the R&D entity’s assessable income – the amount is generally increased by one third.
	For an R&D asset held partially for R&D purposes where the balancing adjustment amount is included in the R&D entity’s assessable income – the R&D component of the amount is generally increased by one third.
The R&D entity is entitled to a deduction equal to the grossed-up value of the incentive component of the associated amounts of R&D tax offset that would have been obtained if the R&D component of the balancing adjustment amount was included in the calculation of the offset.	For an R&D asset held only for R&D purposes where the balancing adjustment amount is allowed as a deduction – the deduction is included in the R&D entity’s R&D tax offset calculation.
	For an R&D asset held partially for R&D purposes where the balancing adjustment amount is allowed as a deduction – the R&D component of the amount is increased by one third or (for small R&D entities) or one half
Similar amended rules apply to balancing adjustments for R&D assets held by R&D partnerships.	Similar rules apply to balancing adjustments for R&D assets held by R&D partnerships.
The transitional rules are amended in line with the primary amendments but continue to apply to R&D assets acquired before the introduction of the Incentive in 2011.	Transitional rules apply to R&D assets acquired before the introduction of the Incentive in 2011.

Source: Explanatory Memorandum, Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019, pp. 23–24.

Conclusion

The changes proposed in Schedule 2 to the Bill appear to be relatively uncontroversial and aimed at ensuring that the recoupment rules ensure taxpayers are not able to double-claim the R&D tax offset.

Although it is arguable that Part IVA would currently apply to R&DTI tax schemes, the changes in Schedule 2 make it clear that this is the case, and should assist the ATO in combatting contrived and artificial schemes designed to obtain an R&D tax offset.

Schedule 3: improving the administration of the R&DTI

Schedule 3 to the Bill proposes to improve the administration and transparency of the R&DTI. The proposed amendments are outlined in table 10: proposed amendments to improve the administration of the R&D Tax Incentive.

Table 10: proposed amendments to improve the administration of the R&D Tax Incentive

New law	Current law
Transparency of R&D claimants and activities
As soon as practicable after the period of two years following the end of the financial year, the Commissioner must publish information about the R&D entities that have claimed notional deductions for R&D activities, including the amount claimed.	No equivalent
ISA determinations
The Board of ISA may also make determinations about the circumstances and ways in which it will exercise its powers, or perform its functions or duties in relation to the Incentive. These determinations are binding on the Board of ISA.	The Board of ISA may make findings specific to an R&D entity’s circumstances, including whether certain activities of the entity are R&D activities. Findings are binding on the Commissioner.
ISA delegations
The Board of ISA and its committees may delegate their powers to any member of Australian Public Service staff assisting them.	The Board of ISA and its committees may delegate their powers to SES employees assisting them.
Extensions of time
The Board’s ability to grant an extension of time is subject to a cap of three months on the total extension available, unless the extension is granted to allow an applicant to wait for the outcome of a separate pending decision.	The Board of ISA must grant extensions of time for registrations and the provision of information of up to 14 days if it is necessary and may grant a longer period if an applicant’s ability to meet the deadline is impaired by events outside the applicant’s control.

Source: Explanatory Memorandum, Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019, p. 43.

Disclosing an entity’s R&DTI information

Part 1 of Schedule 3 proposes inserting section 3H into the Taxation Administration Act 1953 (TAA 1953). Proposed section 3H of the TAA 1953 requires the Commissioner of Taxation to publish the following information (the disclosed information) as soon as practicable after the second 30 June after the financial year corresponding to the income year that the disclosed information relates (that is, two years later):

• the entity’s name
• the entity’s Australian Business Number or Australian Company Number (where there is no ABN) and
• the entity’s notional deductions claimed taking into account any feedstock adjustments for the year.[153]

Allowing ISA to make determinations

In order to increase certainty to R&D entities that have to register with Innovation and Science Australia (ISA), Part 2 of Schedule 3 proposes to amend the IR&D Act as follows:

• proposed subsections 31D(1) and (2) seek to allow the Board of ISA to make, by way of notifiable instrument,[154] general determinations about the circumstances or way in which it will exercise its powers, or perform its functions or duties under Part III of the IR&D Act (which deals with the Board’s functions relating to the R&DTI)—the Board must exercise its powers, and perform its functions and duties in accordance with the determination under proposed subsections 31D(3)
• proposed section 31E compels the Board of ISA to revoke a determination where as a result of reviewing a reviewable decision made in accordance with a determination, that decision is incorrect or inconsistent with a decision of a court, the AAT, the IR&D Act, its Regulations or the decision making principles and
• provides ISA with the power to make a binding determination about whether an activity is a clinical trial.[155]

Delegating ISA Board powers to APS staff

Part 3 of Schedule 3 expands the delegation powers of the Board of ISA to include APS staff.[156] Previously only Senior Executive Service (SES) staff had delegation powers.

Limiting extensions of time

Part 4 of Schedule 3 amends section 3.2 of the Industry Research and Development Decision-making Principles 2011 by preventing the Board of ISA from granting extension of time under the IR&D Act of more than three months. However, proposed subsection 3.2(4) does not extend this time-bar to situations where the extension relates to a pending decision on another matter.

Further information about the proposed changes contained in Schedule 3 of the Bill can be found in the Explanatory Memorandum at pages 41 to 50.

---

[1].      B Ferris, A Finkel and J Fraser, Review of the R&D tax incentive, [Australian Government], [Canberra], 4 April 2016.

[2].      Department of the Prime Minister and Cabinet (PM&C), National Innovation and Science Agenda: welcome to the ideas boom, Australian Government, November 2015.

[3].      Department of Industry, Innovation and Science (DoIIS), Australia 2030: prosperity through innovation: a plan for Australia to thrive in the global innovation race, DoIIS, Canberra, 2017.

[4].      It should be noted that under the future changes to the corporate tax rate, some large R&D entities will have a corporate tax rate of 25 per cent—that is, entities who have a turnover of over $20 million (which makes them a large R&D entity) but less than $50 million (which makes them a base rate entity and provides access to a reduced corporate tax rate). If the R&DTI rate were to remain at 38.5 per cent, these entities would receive a benefit of 13.5 per cent, compared to the proposed 4.5 per cent.

[5].      However, this needs to be balanced against the findings of the Review of the R&DTI that refundability is impacting the long-term sustainability of the R&DTI and is likely to provide fewer tangible benefits for SMEs with larger R&D expenditures. Further, the refundable nature of the R&DTI has provided fewer tangible benefits for SMEs with larger R&D expenditures and opened the R&DTI up to abuse as a result of taxpayers and their advisors devising and implementing aggressive tax arrangements and schemes, see: B Ferris, A Finkel and J Fraser, Review of R&D Tax Incentive, [Australian Government], [Canberra], 4 April 2016, p. 3.

[6].      See generally, J Frydenberg, ‘Second reading speech: Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019’, House of Representatives, Debates, 5 December 2019, p. 7060.

[7].      PM&C, National Innovation and Science Agenda: welcome to the ideas boom, op. cit., p. 1.

[8].      Spillovers generally refer to the extent that the outputs of R&D or ideas created by a firm, flow beyond that firm to unrelated firms and to society in general. Spillovers are viewed as desirable, as the benefits flowing from R&D are not limited to only one firm. Some high profile examples of spillovers include; the internet, GPS, jet engines, digital photography, drones and microwaves. As explained by B Vigliarolo, ‘10 pieces of military technology that changed the way the civilian world works’, TechRepublic website, 19 August 2016, the underlying technologies of each of these were all developed by the military.

[9].     See, for example, the House of Representatives Standing Committee on Science and Innovation, Riding the innovation wave: the case for increasing business investment in R&D, House of Representatives, Canberra, June 2003, p. 65, which concluded that, in practice, a higher level of R&D expenditure does not necessarily equate to higher levels of productivity.

[10].    DoIIS, Australia 2030, op. cit., p. 4.

[11].    This is an oft-cited rationale or justification for the introduction of patent or knowledge box regimes which impose a preferential rate of tax on intellectual property-related income. See, for example, B Skeie, A Johansson, C Menon, S Sorbe, Innovation, patent location and tax planning by multinationals, OECD Working Paper, OECD, Paris, February 2017.

[12].    See generally, CSL, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, [Submission no. 4], 5 November 2018; Cochlear, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, [Submission no. 28], 5 November 2018; Deloitte, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, [Submission no. 18], 5 November 2018; and KPMG, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, [Submission no. 8], 1 November 2018.

[13].    A McCauley and A Gruszka, Crossroads: an action plan to develop a world-leading tech startup ecosystem in Australia, StartupAUS, [Australia], [2019], p. 28.

[14].    B Martin, ‘R&D policy instruments – a critical review of what we do and don’t know‘, Industry and Innovation, 23(2), 2016, p. 2. For information on Professor Ben Martin see: University of Cambridge, Centre for Science and Policy, ‘Professor Ben Martin’, University of Cambridge website.

[15].            Ibid., p. 3.

[16].    Ibid., p. 12.

[17].    H Okamuro, SME policy faced with development of financial technology, T20 Japan policy brief, G20, Japan, revised 27 March 2019, p. 13. As explained by the OECD, externalities refer to situations when the effect of production or consumption of goods and services imposes costs or benefits on others which are not reflected in the prices charged for the goods and services being provided.

[18].    The effectiveness of R&D policy mixes is also discussed by: N Bloom, J van Reenen and H Williams, ‘A toolkit of policies to promote innovation’, Journal of Economic Perspectives, 33(3), Summer 2019; N Knoll, Business R&D and the role of public policies for innovation support: a qualitative approach, WIFO, June 2003; Okamuro, SME policy faced with development of financial technology, op. cit.; and European Commission, ‘R&D tax incentives: how to make them most effective’, European Commission webpage.

[19].    OECD, Review of national R&D tax incentives and estimates of R&D tax subsidy rates, 2017, OECD, 18 April 2018, p. 20.

[20].            Ibid.

[21].            Ibid., pp. 20–22.

[22].            Ibid., p. 5.

[23].    Ibid., p. 59.

[24].    BDO Germany, ‘Germany – draft bill on R&D tax incentive’, BDO website, 3 December 2019; K Hensley-Chelstowska, ‘Germany joins list of OECD countries offering R&D tax incentive’, Duff & Phelps, 26 December 2019, p. 1.

[25].    OECD, Frascati manual 2015: guidelines for collecting and reporting data on research and experimental development, OECD Publishing, Paris, 2015.

[26].            OECD, Review of national R&D tax incentives, op. cit., p. 6.

[27].    Ibid., pp. 12–13. An example of this category of indirect R&D incentive is a patent box regime, which imposes a reduced corporate tax rate on eligible income earned from patents and other intellectual property.

[28].    The tables contain information about the Australian government’s budget allocations and estimates for R&D, science, and innovation.

[29].    Australian Government, ‘Science, Research and Innovation budget tables, 2019–20, ‘Sector tab’.

[30].    Including $839 million to the CSIRO and $468 million to the Defence Science & Technology Group.

[31].    Including $184 million to Co-operative Research Centres, $221 million to the National Health and Medical Research Council (NHMRC) and $342 million to Rural R&D Corporations.

[32].    R Thompson and A Skali, ‘The additionality of R&D tax policy in Australia’, Centre for Transformative Innovation, Swinburne University, February 2016, pp. 11–12; K Del Villar, Taxation Laws Amendment (Research and Development) Bill 2001, Bills digest, 44, 2001–02, Department of the Parliamentary Library, Canberra, 2001, p. 2.

[33].    Del Villar, Taxation Laws Amendment (Research and Development) Bill 2001, op. cit., p. 2.

[34].    Ibid.

[35].    Ibid., pp. 12–13.

[36].    Explanatory Memorandum, Tax Laws Amendment (2007 Measures No. 5) Bill 2007, pp., 11, 237–240.

[37].    Thompson and Skali, ‘The additionality of R&D tax policy in Australia’, op. cit., p. 12.

[38].    Australian Government, ‘Part 2: expense measures’, Budget measures: budget paper no. 2: 2009–10 p. 361; Explanatory Memorandum, Tax Laws Amendment (Research and Development) Bill 2010, p. 5.

[39].    B Shorten, ‘Second reading speech: Tax Laws Amendment (Research and Development) Bill 2010’, House of Representatives, Debates, 30 September 2010, p. 279.

[40].            Explanatory Memorandum, Tax Laws Amendment (Research and Development) Bill 2011, pp. 5 and 9.

[41].            Ibid., pp. 5, 7 and 9.

[42].            Ibid., p. 5.

[43].    A tax offset is able to be applied directly to an entity’s tax payable to reduce their tax liability for a given income year.

[44].    Income Tax Assessment Act 1997 (ITAA 1997), items 1 and 3 of the table in subsection 355-100(1).

[45].    ITAA 1997, item 35 of the table in subsection 63-10(1); section 67-30 and the note to subsection 355-100(1).

[46].    It has been assumed the entity is a base rate entity and has a 27.5 per cent corporate tax rate.

[47].    ITAA 1997, subparagraph 355-35(1)(a).

[48].    ITAA 1997, subparagraph 355-35(1)(b).

[49].    ITAA 1997, section 355-35.

[50].    Australian Taxation Office (ATO), ‘Eligible entities’, ATO website, last updated 26 June 2017.

[51].    ITAA 1997, subparagraph 355-205(1)(a)(i); Industry Research and Development Act 1986, section 27A.

[52].    Australian Taxation Office (ATO), ‘Eligible activities’, ATO website, last updated 26 June 2017.

[53].    ITAA 1997, section 355-100.

[54].    ITAA 1997, section 355-100 and Division 65. Items 1 to 5 of Schedule 22 of the Budget Savings (Omnibus) Act 2016 reduced the respective rates from 45% to 43.5% and 40% to 38.5 % with effect from 1 July 2016.

[55].    A base rate entity is one that has:

·       an aggregated turnover less than the aggregated turnover threshold – which is $50 million for the 2019–20 income year and

·       80% or less of their assessable income is base rate entity passive income – this replaces the requirement to be carrying on a business.

[56].    ITAA 1997, subsection 355-100(3); ATO, ‘Research and development tax incentive: about the program’, ATO website, last updated 23 June 2017.

[57].    ITAA 1997, sections 67-30, 63-10 and subsection 355-100(1).

[58].    Ferris et al, Review of R&D tax incentive, op. cit., p. 15.

[59].    Ibid., p. 22.

[60].    See, for example, ATO, ‘R&D tax incentive alerts by activity’, ATO website, last updated 16 October 2019.

[61].    E Tadros, P Smith and N Gillezeau, ‘How CBA, Deloitte killed R&D for star-ups’, The Australian Financial Review, 12 December 2018, p. 5; P Smith and N Gillezeau, ‘Airtasker hit by R&D incentive tax crackdown that threatens tech firms’, The Australian Financial Review, 3 December 2018.

[62].    Ibid.

[63].    E Tadros, P Smith and N Gillezeau, ‘Tax Office targets advisers over R&D claims in secret tax promoter list’, The Australian Financial Review, 12 December 2018.

[64].    ATO, ‘$4 million fine for company promoting R&D tax schemes’, ATO website, updated 21 March 2018.

[65].    M Turnbull (Prime Minister), National Innovation and Science Agenda, media release, 7 December 2015.

[66].            Ferris, Finkel and Fraser, Review of the R&D tax incentive, op. cit., p. 1.

[67].    G Hunt (Minister for Industry, Innovation and Science), Tax incentive review report released for consultation, media release, 28 September 2018.

[68].            Ferris, Finkel and Fraser, Review of the R&D tax incentive, op. cit., p. 2.

[69].    Ibid.

[70].    Ibid., p. 3.

[71].    Ibid.

[72].    Ibid., p. 4.

[73].    Ibid.

[74].    For example, adopting a single application process; developing a single programme database; reviewing the two-agency delivery model; and streamlining compliance review and findings processes.

[75].    Ferris, Finkel and Fraser, Review of the R&D tax incentive, op. cit., p. 4.        

[76].    Australian Government, Budget 2018: Reforming the R&D Tax Incentive, fact sheet: tax integrity, n.d., p. 1.

[77].    Senate Economics Legislation Committee, Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 [Provisions], Senate, Canberra, February 2019.

[78].    ITAA 1997, subsection 355-100(3).

[79].    Ferris, Finkel and Fraser, Review of the R&D Tax Incentive, op. cit., p. 4.

[80].    ITAA 1997, table item 1 in subsection 355-100(1).

[81].    ITAA 1997, sections 63-10, 67-30 and 355-100.

[82].    Ferris, Finkel and Fraser, Review of the R&D Tax Incentive, op. cit., pp. 3 and 37–8.

[83].    ITAA 1997, sections 63-10 and 355-100.

[84].    Ferris, Finkel and Fraser, Review of the R&D Tax Incentive, op. cit., p. 4.

[85].    Senate Economics Legislation Committee, Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 [Provisions], op. cit., paragraphs, 1.5 and 1.6, Appendix 2.

[86].    Ibid., p. 34.

[87].    Ibid., p 32.

[88].    Item 16 of Schedule 1 and Part 1 in Schedule 2 of the Bill.

[89].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 1, 2020, The Senate, 5 February 2020, p. 40.

[90].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 12, 2018, The Senate, Canberra, 17 October 2018, p. 57.

[91].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 13, 2018, The Senate, Canberra, 14 November 2018.

[92].    Ibid., p. 30

[93].    Ibid., pp. 57–58.

[94].    Ibid., p. 31.

[95].    Ibid.

[96].    Ibid., pp. 31–32.

[97].    B O’Connor (Shadow Minister for Employment and Industry) and C O’Neil (Shadow Minister for Innovation, Technology and the Future of Work), The Government’s R&D Bill, media release, 10 December 2019.

[98].    A Bandt, Greens launch science and research policy, media release, [29 April 2019].

[99].    This should be balanced against the fact that the Bill’s refundable R&DTI cap ($4 million excluding clinical trials) is more generous than the Review of R&DTI’s recommended $2 million cap.

[100].  P Durkin, ‘Crackdown on R&D tax sweetener tipped to save $2 billion’, The Australian Financial Review, 9 May 2018, p. 7.

[101].  B Potter and P Durkin, ‘Start-up shock as $1.35b squeezed from R&D’, The Australian Financial Review, 3 April 2019, p. 12.

[102].  Deloitte, Tax Insights: revised R&D tax incentive Bill introduced into Parliament, Deloitte, 5 December 2019, p. 1.

[103].  Ibid., p. 5.

[104].  D Sadler, ‘Backlash at R&D tax changes’, InnovationAus website, 8 November 2018.

[105].  GlaxoSmithKline Australia (GSK), Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, [submission no. 72], 1 November 2018, pp. 5–6.

[106].  CSL, Submission to the Senate Economics Legislation Committee, op. cit., p. 1.

[107].  KPMG, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, op. cit., p. 2.

[108].  CAANZ, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, [Submission no. 58], 5 November 2018, p. 4.

[109].  Ibid.

[110].  University of Melbourne, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, [submission no. 48], 5 November 2018, p. 4.

[111].  Universities Australia, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, [submission no. 50], 6 November 2018, p. 3.

[112].  Ibid.

[113].  The Lithium Valley webpage states that, ‘located in the Western Trade Coast of Western Australia, Lithium Valley is the premiere global industry cluster focussed on the secondary and tertiary processing of lithium and other battery metals’.

[114].  See, for example, H Hastie, ‘Research tax refund cap could halt WA's Lithium Valley in its tracks’, The Sydney Morning Herald, 15 August 2018; S Tasker, 'Tax hit "may lose R&D investment"’, The Australian, 10 May 2018, p. 23; and B Potter and J Shapiro, ‘Government R&D tax break raid “mind-numbingly stupid”, says Daniel Petre’, The Australian Financial Review, 31 July 2018.

[115].  The Statement of Compatibility with Human Rights can be found at page 73 of the Explanatory Memorandum to the Bill.

[116].  Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 1, 2020, Parliament of Australia, Canberra, 5 February 2020, p. 96.

[117].  ITAA 1997, table items 1, 2 and 3 in subsection 355-100(1).

[118].  Ibid; ATO, ‘Changes to company tax rates’, ATO website, last updated 5 June 2019.

[119].  ITAA 1997, table item 2 in subsection 355-100(1) as amended by item 7 in Schedule 1 to the Bill. Section 995-1 of the ITAA 1997 defines an exempted entity as one whose ordinary income and statutory income is exempt from income tax because of this Act or because of another Commonwealth law, no matter what kind of ordinary income or statutory income the entity might have; or an untaxable Commonwealth entity.

[120].  See, for example, CAANZ, Submission, op. cit., pp. 3 and 6.

[121].  Calculated by subtracting the relevant corporate tax rates for base rate entities from the 43.5 per cent R&D tax offset amount.

[122].  That is, the R&D tax offset amount of 43.5 per cent less 30 per cent, being the previous corporate tax rate.

[123].  It is submitted that the proposed amendments to subsection 355-100(1) of the ITAA 1997 could be improved by stating, ‘corporate rate for the income year plus the R&D premium (italicised is added text)’, and a note stating the R&D premium is defined in subsection 355-100(1A) of the ITAA 1997.

[124].  ‘Notional deductions’ are unique to the R&DTI regime and are explained in the in the Explanatory Memorandum to the Bill: ‘The basis for calculating R&D tax offsets is the concept of a notional deduction. A notional deduction is generally recognised for expenditure (Subdivision 355-D) on R&D activities and depreciation on assets held for R&D purposes (Subdivision 355-E) subject to conditions. These deductions are referred to as notional because they are only used to calculate an R&D entity’s entitlement to the R&D tax offset and for some other discrete purposes (section 355-105). That is, the entitlement to the Incentive for a notional deduction replaces any entitlement to an underlying tax deduction’, Explanatory Memorandum, op. cit., p. 6.

[125].  Explanatory Memorandum, op. cit., pp. 13–14; ITAA 1997, proposed subsection 355-100(1A) at item 9 of Schedule 1 to the Bill.

[126].  Explanatory Memorandum, op. cit., p. 14.

[127].  Explanatory Memorandum, op. cit., pp 14–5; ITAA 1997, subsection 995-1(1) definition of ‘accounting principles’ and proposed section 355-115.

[128].  ITAA 1997, item 35 of the table in subsection 63-10(1); subsection 67-30(1); item 1 of the table in subsection 355-100(1).

[129].  ITAA 1997, item 35 of the table in subsection 63-10(1).

[130].  Inserted by item 7 in Part 2 of Schedule 3 of the Bill.

[131].  Therapeutic Goods Administration (TGA), ‘Acronyms & glossary’, TGA website; The University of Melbourne, Submission, op. cit., p. 6.

[132].  World Health Organisation (WHO), ‘Health topics: Clinical trials’, WHO website.

[133].  The University of Melbourne, Submission, op. cit., p. 6.

[134].  GSK, Submission, op cit., pp. 8–9.

[135].  Explanatory Memorandum, op. cit., p. 63.

[136].  Parliamentary Budget Office (PBO), 2019 Post-election report, Appendix E—costing documentation for the Australian Labor Party’s election commitments, PBO, Canberra, 19 June 2019, p. E-131.

[137].  Ibid., p. E-132.

[138].  Ibid.

[139].  Explanatory Memorandum, op. cit., pp. 23–5.

[140].  Ibid., pp. 24–5.

[141].  Ibid., p. 19.

[142].  Ibid., pp. 19–20.

[143].  ATO, ‘Feedstock adjustments’, ATO website, updated 28 February 2017.

[144].  Explanatory Memorandum, op. cit., p. 20.

[145].  Ibid.

[146].  Ibid.

[147].  ITAA 1997, sections 40-295, 40-300 and 40-85; Explanatory Memorandum, op. cit., p. 21.

[148].  ITAA 1997, section 40-285.

[149].  Explanatory Memorandum, op. cit., p. 21.

[150].  ITAA 1997, section 355-305.

[151].  Explanatory Memorandum, op. cit., p. 22.

[152].  Ibid.

[153].  Ibid., p. 44.

[154].  Under the Legislation Act 2003, notifiable instruments are not subject to the tabling, disallowance, and sunsetting requirements that apply to legislative instruments.

[155].  IR&D Act, proposed subparagraphs 27A(1)(c), 27B(1)(e), 27B(1)(f), 27J(1)(e), 27J(1)(f), 28A(1)(ca) and 28A(1)(cb).

[156].  IR&D Act, proposed subsection 22A(1) and proposed paragraph 21(1)(e).

 

For copyright reasons some linked items are only available to members of Parliament.

---

© Commonwealth of Australia

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.