ACIS Administration (Modulation) Guidelines 2006 Variation 2010 (No. 1)

EXPLANATORY STATEMENT
 

ACIS Administration (Modulation) Guidelines 2006 Variation 2010 (No.1)

General Outline

The ACIS Administration (Modulation) Guidelines 2006 (the Guidelines) are made under section 55 of the ACIS Administration Act 1999 (the ACIS Act) for Stage 2 of ACIS.  The Guidelines set out how the following kinds of credit are to be modulated:

• unmodulated investment credit issued to motor vehicle producers (MVPs);
• unmodulated investment credit issued to non-MVPs; and
• unmodulated capped production credit.

The purpose of modulating the credit is to ensure that:

• the cap for ACIS Stage 2 is not exceeded; and
• in respect of any ACIS year, the 5% of sales limit on individual participants is not exceeded.

An ACIS Stage 2 modulation system to give effect to the Guidelines has been in place since 1 January 2006.  The Department of Innovation, Industry, Science and Research (DIISR) recently completed an internal review of the system’s efficiency and effectiveness.  This has resulted in the identification of both legislative and administrative improvements for the ACIS Stage 2 modulation system, notwithstanding the fact that Stage 2 will cease on 31 December 2010.  This variation will improve the effectiveness of the 2006 Guidelines. 

It provides that the Secretary, under the authority of subsection 68(5) of the ACIS Act, may revise the calculations used for determining the amount of duty credit a participant is entitled to receive where the information provided by a participant for these calculations may have been inaccurate or incomplete. 

This provision may only be used in circumstances where the rights of a participant are not disadvantaged.  This means that under section 33 of the Guidelines the Secretary may only make a positive adjustment to the ledger.  In addition, the Secretary must ensure that the value of duty credit arising from a revision must not exceed:

• the ACIS Stage 2 cap
• the 5 per cent of sales limit for a participant; and
• the maximum entitlement available under the ACIS Act

The variation also changes the timing of the calculation of modulation rates in 2010 until after quarterly returns are made by participants.  This will ensure that actual data rather than forecasts is used in the modulation calculations for each quarter.  The value of the credit to be issued will be more accurate and improve the efficiency of the modulation system. This change may result in a delay in the issuing of duty credits to some participants by several weeks.  

The variation further corrects a number of provisions in the 2006 Guidelines that if left uncorrected could, unintentionally, operate in a manner that would be inconsistent with the operation of the ACIS Act.

Legislative Authority

Section 55 of the ACIS Act provides the authority for this variation.

Financial Implications

There are no financial implications arising from this variation.

Consultation

This variation has resulted from ongoing consultations with the following parties in respect of the operation of the Guidelines:

• the DIISR program delivery arm, AusIndustry;
• the Australian Government Solicitor;
• Walter & Turnbull (consultants);
• the Office of Legislative Drafting and Publishing; and
• key representatives from the Australian automotive industry.

Notes on Sections included in the variation

Section 1: Name of Variation

This prescribes the name of the instrument as the ACIS Administration (Modulation) Guidelines 2006 Variation 2010 (No.1).

Section 2: Commencement

This provides for the instrument to commence on the day after it is registered in accordance with the Legislative Instruments Act 2003.

Section 3: Variation of ACIS Administration (Modulation) Guidelines (2006)

This is the formal provision that provides for the variation of the ACIS Administration (Modulation) Guidelines 2006 as outlined in Schedule 1.

Schedule 1 Variation

Part 6:  Correction of ledger

1.  Section 33: Correction of Ledger

This new Part provides for the Secretary to revise calculations for a participant relating to ACIS Stage 2.  In particular, it provides the authority for the Secretary to make positive adjustments to the ACIS ledger where information provided by the participant:

•  may have been inaccurate or incomplete (including an overestimate or an underestimate); or
•  relates to expected, estimated or forecast investment or production reflected in an entry in the ledger.

The revised calculations must ensure that:

•  neither the ACIS stage 2 cap nor the 5% of sales limit for the participant's ACIS goods and services for the relevant ACIS year is exceeded (which may require that a revised modulation rate be calculated for MVPs or non-MVPs); and
•  a participant's rights must not be affected so as to disadvantage that participant.

Part 7: Arrangements for ACIS year 2010

2. Section 34: Application

 This section provides that the operation of Part 7 only relates to ACIS year 2010.

3. Section 35: Interpretation

This section requires that reference to a modulation rate refers to a modulation rate worked out under section 16 or 17 (as the case requires) as modified by this Part.

4. Section 36: Calculations

This section requires that under Part 3, Division 2 of the Guidelines, the calculations are:

•  to be based, where possible, on the most accurate information, including known values or amounts instead of estimates or forecasts; and
•  To ensure that neither the ACIS Stage 2 cap nor the 5% of sales limit for the participant's ACIS goods and services for the ACIS year are exceeded.

5. Section 37: Timing: first second and third quarters ACIS year 2010

This section requires that:

•  the MVP and non-MVP modulation rates for the first three quarters in 2010 are worked out as soon as practicable after the last day of a quarter in which a participant is permitted to make a return to ensure that the most up-to-date information is included in the calculation of the modulation rates; and
•  the denominator of the MVP (subsection 11(8)) and non-MVP (subsection 12(8)) modulation formulas for total expected capped claims be limited for the 5% of sales limit in accordance with the operation of section 14.

6. Section 38: Timing: final quarter ACIS year 2010

This section requires that:

•  the MVP and non-MVP modulation rates for the final quarter in 2010 is worked out as soon as practicable after the last day of a quarter in which a participant is permitted to make a return to ensure that the ACIS Stage 2 cap is not exceeded; and
•  the denominator reference for the MVP (subsection 16(8)) and non-MVP (subsection 17(8)) modulation formulas for total expected capped claims be changed to "total capped credit".  Total capped claims in the calculation of the modulation rates for the final quarter are not limited for the 5% of sales limit or the ACIS Stage 2 cap may be exceeded.

7. Section 39: Provisions to be regarded as omitted

This section requires that a number of provisions do not apply in relation to ACIS year 2010, as they serve no function in the calculation of the MVP and non-MVP modulation rates, including:

•  subsection 11(7) relating to the MVP modulation rate for a quarter (not including the final quarter);
•  subsection 12(7) relating to the non-MVP modulation rate for a quarter (not including the final quarter;
•  subsection 16(7) relating to the MVP modulation rate for the final quarter; and
•  subsection 17(7) relating to the non-MVP modulation rate for the final quarter.

 The section also requires that section 19 does not apply in relation to the calculation of MVP and non-MVP modulation rates for the final quarter as its operation may result in the ACIS Stage 2 cap being exceeded.

This section further requires that Part 3, Division 3 and sections 29 to 31 do not operate in relation to ACIS year 2010.  The review of the ACIS modulation system has found that the ACIS Act does not provide for the calculation of modulation rates at a point in time for additional amounts of unmodulated credit.  Therefore these provisions serve no function.