Moreton Resources Ltd and Innovation and Science Australia (Taxation) [2018] AATA 3378 (10 September 2018)
Division:General Division
File Number: 2016/0604
Re:Moreton Resources Ltd
APPLICANT
AndInnovation and Science Australia
RESPONDENT
Decision
Tribunal:Deputy President S A Forgie
Date:10 September 2018
Place:Melbourne
The Tribunal decides to:
affirm the decision of the respondent dated 21 December 2015 confirming its decision dated 21 August 2015 that activities in respect of which Moreton Resources had applied for registration were not R&D activities as defined in s 355-20 of the Income Tax Assessment Act 1997.
.................[sgd].......................................................
Deputy President S A Forgie
TAXATION – RESEARCH AND DEVELOPMENT TAX INCENTIVE – underground coal gasification pilot project - whether R&D activities – decision affirmed
Legislation
A New Tax System (Goods and Services Tax) Act 1999
Acts Interpretation Act 1901 s 23(b)
Corporations Act 2001 s 249D
Environmental Protection Act 1994 (Qld) ss 7, 11, 146(1), 146(2), 147, 147(1), 147(2), 148, 148(1)(c), 148(3) 148(4), 149, 154(2), 155, 156, 187, 188, 193, 193(2), 193(3)(b), 194(2)(b), 358, 360(1)(c), 360(2), 361, 361(1), 361(2), 426, 430, 430(2) and 430(3)
Environmental Protection (Greentape Reduction) and Other Legislation Amendment Act 2012
Income Tax Assessment Act 1997 ss 355-5, 355-5(2), 355-20, 355-25, 355-25(1), 355‑25(1)(a), 355-25(1)(a )(i); 355-25(1)(a )(ii), 355-25(1)(b), 355-25(1)(f), 355-25(2), 355‑25(2)(f), 355-30, 355-30(2), 355-30(2)(a), 355-35(1)(a), 355-100(1), 355-100(2), 355‑205, 355-205(1) and 995-1(1)
Income Tax Assessment Act 1936 ss 73B, 73B(1), 73B(1)(a) and 73B(2C)
Industry Research and Development Act 1986 ss 3, 4(1), 27A, 27A(1), 27A(1)(a), 27A(1)(b), 27A(3)(a), 27A(3)(b), 27B, 27B(1), 27B(2), 27C, 27D, 27D(c), 27F, 27F(2), 27F(3), 27F(4), 27J, 27J(1), 27J(1)(a), 27J(1)(c), 27J(1)(c)(i) to (iv), 27J(1)(d), 27J(2), 27K(2), 27M, 27M(1), 28A, 28A(1), 32A, 32B, 32J and 39J
Industry Research and Development Decision‑making Principles 2011
Land Access Code 2010
Mineral Resources Act 1989 (Qld) ss 186 and 208(3)
Petroleum and Gas (Production and Safety) Act 2004
Petroleum and Gas (Production and Safety) Regulation 2004
Tax Laws Amendment (Research and Development) Bill 2010
Taxation Administration Act 1953 s 14ZZK(b)(i)
Taxation Laws Amendment Act (No 3) 1996 s 3
Tax Laws Amendment (Research and Development) Act 2011
Cases
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27; 260 ALR 1; 73 ATR 256
Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1; (1983) 44 ALR 607; 70 FLR 447; 83 ATC 4015; 13 ATR 825
Blue Metal Industries Limited v Dilley (1969) 117 CLR 651; [1970] AC 827; [1969] 3 All ER 437; [1969] 3 WLR 357
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Cabell v Markham (1945) 148 F(2d) 737
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384; (1997) 141 ALR 618
Cougar Energy Limited v Debbie Best, Chief Executive under the Environmental Protection Act 1994 [2011] QPEC 150; [2012] QPELR 370
Deal v Father Pius Kodakkathanath [2016] HCA 31; (2016) 258 CLR 281; 334…
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- AGLC
- Moreton Resources Ltd and Innovation and Science Australia (Taxation) [2018] AATA 3378
- Case
- [2018] AATA 3378
- Decision Date
CaseChat Overview and Summary
The primary legal issue before the Tribunal was to determine the correct classification of Moreton Resources' R&D activities under the relevant provisions of the *Industry Research and Development Act 1986* (Cth) (the IRD Act), specifically in light of amendments introduced by the IRD Amendment Act in 2011. This involved interpreting sections 27A, 27J, and 27M of the IRD Act, as well as transitional provisions relating to the repeal of section 39J.
The Tribunal considered the provisions of section 27J(1) of the IRD Act, which outlines the types of findings ISA may make regarding an R&D entity's registration, including whether an activity was a core R&D activity or a supporting R&D activity. The Tribunal noted that any findings made by ISA under section 27J are subject to section 32B, meaning they cannot be inconsistent with earlier findings. Furthermore, section 27M allows ISA to vary an entity's registration if the variation is consistent with any findings made under Part III of the IRD Act and is otherwise justified. The Tribunal also had regard to transitional provisions, specifically Item 16 of Schedule 4 of the IRD Amendment Act, which stipulated that references to registration under the current section 27A would include references to registration under the repealed section 39J for certain provisions, provided the R&D activity registered under the former section 39J was a core R&D activity within the meaning of the amendments.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Section 27J(1) provides:“The Board may make one or more findings to the following effect about an R&D entity’s registration under section 27A for an income year (the registration year):(a)that all or part of a registered activity was a core R&D activity conducted during the registration year;(b)that all or part of a registered activity was not an activity of a kind covered by paragraph (a);(c)that all or part of a registered activity was a supporting R&D activity conducted during the registration year and in relation to:(i)one or more specified registered core R&D activities; or(ii)one or more specified core R&D activities for which the entity has been registered in an earlier income year; or(iii)one or more specified core R&D activities yet to be conducted for which the entity could be registered in the registration year if those activities were conducted during the registration year; or(iv)several specified core R&D activities, each covered by subparagraph (i), (ii) or (iii);(d)that all or part of a registered activity was not an activity of a kind covered by paragraph (c).Note 1:A finding is reviewable (see Division 5).Note 2:The Board may make a finding under paragraph (b) if, for example, the Board has sufficient information to make a finding under paragraph (a). Similarly, the Board could make a finding under paragraph (d) if it has sufficient information to make a finding under paragraph (c).” If the Board makes a finding under s 27J(1) in relation to an R&D entity’s registration, it may specify in the finding the time to which that finding relates.[17] As s 27J is subject to s 32B, the findings that the Board makes cannot be inconsistent with earlier findings made by the Board. [17] IRD Act; s 27J(2) Under s 27M[18] the Board may, by notice in writing to the R&D entity, vary the entity’s registration under s 27A for an income year if that entity applies for the variation, the variation is consistent with any findings made by the Board under Part III of the IRD Act and making the variation is justified in accordance with decision-making principles.[18] IRD Act; s 27M(1) Part III of the IRD Act, including ss 27A and 27J, was introduced into that legislation by the IRD Amendment Act with effect from 8 September 2011.[19] Before their introduction, R&D activities were registered under s 39J, which was repealed with effect from 8 September 2011.[20] Item 16 of Schedule 4 of the IRD Amendment Act included transitional provisions so that references to registration under the current s 27A would include a reference to registration under the repealed s 39J in the following provisions:“(a) subparagraph 27A(3)(b)(i);(b) subparagraph 27B(1)(c)(ii);(c) subparagraph 27J(1)(c)(ii);(d) paragraph 28A(1)(b);(e) paragraph 28D(2)(b).Note: For each of these provisions, the R&D activity registered under former section 39J will need to be a core R&D activity within the meaning of the amendments made by this Act.”[19] IRD Amendment Act; s 3, Schedule 2, Item 1 and s 2, Item 2[20] IRD Amendment Act; Schedule 2, Item 34