CLOTHING AND HOUSEHOLD TEXTILE (BUILDING INNOVATIVE CAPABILITY) AMENDMENT SCHEME 2012 (NO.1)
EXPLANATORY STATEMENT
Issued by authority of the Minister for Industry and Innovation
Subject: Textile, Clothing and Footwear Investment and Innovation Programs Act 1999
Clothing and Household Textile (Building Innovative Capability) scheme 2010
Authority
The Clothing and Household Textile (Building Innovative Capability) scheme 2010 (the BIC Scheme) and the Clothing and Household Textile (Building Innovative Capability) Amendment scheme 2012 (No. 1) (the Amendment Scheme) are formulated under the authority of section 37ZM of the Textile, Clothing and Footwear Investment and Innovation Programs Act 1999.
General Outline
The BIC Scheme is an entitlement based grants scheme which fosters sustainable and internationally competitive manufacturing and design of clothing and household textiles. The BIC Scheme operates by providing incentives in the form of grants for eligible research and development, including innovative product design activities, innovative process improvements, market research and industrial property rights. The BIC Scheme is funded for activities in the period 2010-11 to 2014-15 and the total funding available for activities in this period is $112.5 million. As grants are paid annually, and in arrears, the last payments made under the BIC Scheme will occur in the 2015-16 financial year for expenditure incurred in 2014-15.
Purpose and Operation
The purpose of this Amendment Scheme is to make consequential amendments to the BIC Scheme following the enactment of the Tax Laws Amendment (Research and Development) Act 2011. This Act was one of the legislative mechanisms by which the former Research and Development Tax Concession was replaced by the new R&D Tax Incentive.
The BIC Scheme shared some definitions with provisions in the Income Tax Assessment Act 1936 (the ITAA 1936). It also shared, for ease of administration, a registration process stipulated in the Industry Research and Development Act 1986 (the IR&D Act). In addition, clawback and recoupment provisions in the ITAA 1936 and the Income Tax Assessment Act 1997, which addressed any ‘double-dipping’ of the former Research and Development Tax Concession and other benefits such as a government grant, were drawn to the attention of BIC claimants in a Note in the BIC Scheme. Some of these provisions were re-located and re-numbered when the Tax Laws Amendment (Research and Development) Act 2011 commenced on 8 September 2011.
The consequential changes made in this Amendment Scheme will allow the BIC Scheme to continue to operate as originally intended, without any substantive change flowing from the legislative provisions associated with the commencement of the Tax Laws Amendment (Research and Development) Act 2011. The Amendment Scheme has the effect of preserving the eligibility provisions in the BIC Scheme and ensuring that there are no new compliance or administrative costs.
The opportunity has been taken to insert some Notes, and to improve the wording of an existing Note, so that readers can appreciate the context of provisions more readily and locate reference documents more quickly.
The amendments are retrospective. This ensures that there is no disadvantage or detriment to BIC Scheme claimants: grant applications processed in the 2012-13 financial year will be tested against the same eligibility criteria that claimants expected at the time they incurred their expenditure on eligible activities in the
2011-12 program year. The amendments therefore do not cause disadvantage or detriment to a BIC Scheme claimant or any other person.
Consultation
The Council of Textile and Fashion Industries of Australia was consulted about the proposed amendments and supported the proposed approach.
The Office of Best Practice Regulation (OBPR) has advised that a Regulation Impact Statement is not required (OBPR reference number 14706 refers).
Financial Implications
There are no financial implications arising from the Amendment Scheme.
Details of the Clothing and Household Textile (Building Innovative Capability) Amendment scheme 2012 (No. 1).
1 – Name of scheme
Section 1 provides that the name of the scheme is the Clothing and Household Textile (Building Innovative Capability) Amendment scheme 2012 (No. 1).
2 – Commencement
Section 2 provides, first, that sections 1 to 3 and Schedule 1 are taken to have commenced on 8 September 2011. This ensures that the provisions of the Clothing and Household Textile (Building Innovative Capability) scheme (the BIC Scheme) which were applicable before the commencement of the Tax Laws Amendment (Research and Development) Act 2011 will continue to apply after the commencement of that Act on 8 September 2011. As the purpose of the retrospective commencement of these provisions is to ensure that the grant applications processed in the 2012-13 financial year will be tested against the same eligibility criteria that claimants expected at the time they incurred their expenditure on eligible activities in the 2011-12 program year, this provision does not cause disadvantage or detriment to a BIC Scheme claimant or any other person.
Section 2 provides, next, that section 4 and Schedule 2 are taken to have commenced on 1 July 2012. An earlier commencement date, such as 8 September 2011, was not required as transitional provisions in the Tax Laws Amendment (Research and Development) Act 2011 provided for research agencies registered immediately before the commencement of that Act to be taken to be registered under the new provision. As the purpose of the retrospective commencement of this provision is to ensure that registrations that occur for the 2012-13 financial year are also recognised for BIC Scheme purposes, the amendment does not cause disadvantage or detriment to a BIC Scheme claimant or any other person.
3 – Amendment of Clothing and Household Textile (Building Innovative Capability) scheme 2010
Section 3 provides that Schedule 1 to the scheme amends the Clothing and Household Textile (Building Innovative Capability) scheme 2010.
4 – Amendment of Clothing and Household Textile (Building Innovative Capability) scheme 2010
Section 4 provides that Schedule 2 to the scheme amends the Clothing and Household Textile (Building Innovative Capability) scheme 2010.
SCHEDULE 1 – Amendments taken to have commenced on 8 September 2011
Item [1] – Section 1.4, definition of pilot plant
Item [1] substitutes a new definition of pilot plant. The term pilot plant formerly had the meaning given by subsection 73B (1) of the Income Tax Assessment Act 1936 (ITAA 1936). This provision was repealed by the Tax Laws Amendment (Research and Development) Act 2011 on 8 September 2011. The substituted provision
re-instates in the BIC Scheme the former meaning by providing that pilot plant has the meaning given by subsection 73B (1) of the ITAA 1936 as in force immediately before 8 September 2011.
A Note has been inserted so that readers understand the context of the 8 September 2011 date and to help readers locate the relevant version of the ITAA 1936 on the ComLaw database. The compilation number for the relevant version of the ITAA 1936 is C2011C00612.
Item [2] – Section 1.4, definition of research and development activity, including the note
Item [2] substitutes a new definition of research and development activity. The term research and development activity formerly had the meaning given in section 73B of the Income Tax Assessment Act 1936 (ITAA 1936). This provision was repealed by the Tax Laws Amendment (Research and Development) Act 2011 on 8 September 2011. The substituted provision re-instates in the BIC Scheme the former meaning by providing that research and development activity has the meaning given by subsection 73B (1) of the ITAA 1936 as in force immediately before 8 September 2011.
Note 1 has been inserted to draw to readers’ attention that only certain kinds of expenditure in relation to research and development are eligible clothing and household textile expenditure under section 2.2 of the BIC Scheme.
Note 2 has been inserted so that readers understand the context of the 8 September 2011 date and to help readers locate the relevant version of the ITAA 1936 on the ComLaw database. The compilation number for the relevant version of the ITAA 1936 is C2011C00612.
Item [3] – Section 2.1, note
Item [3] substitutes a Note drawing readers’ attention to the recoupment and clawback provisions in the Income Tax Assessment Act 1997 (ITAA 1997) which address any ‘double-dipping’ of the R&D Tax Incentive and other payments or benefits such as a government grant. Equivalent provisions in relation to the Research and Development Tax Concession were formerly contained in Subdivision 20A of Chapter 2 of the ITAA 1997 and section 73C of the Income Tax Assessment Act 1936 (ITAA 1936). The Tax Laws Amendment (Research and Development) Act 2011, which commenced on 8 September 2011, consolidated the provisions within the ITAA 1997: Subdivision 20A retained its numbering but the former section 73C of the ITAA 1936 is now part of Subdivision 355-G of Chapter 3 of the ITAA 1997. This Note entails no substantive change to the BIC Scheme: it restates and updates cross-references to tax law for the benefit of readers.
SCHEDULE 2 – Amendments taken to have commenced on 1 July 2012
Item [4] – Paragraph 2.2 (3) (a)
Item [4] substitutes a provision relevant to the eligibility of expenditure on Australian-based research and development activity when conducted by an entity on behalf of another entity. The substituted provision requires an entity carrying out such activities to be a research service provider registered under section 29A of the Industry Research and Development Act 1986. The BIC Scheme formerly required that an entity carrying out such activities be a research agency registered under section 39F of the Industry Research and Development Act 1986. The substituted provision reflects the new terminology and new numbering of the registration requirement which came into force, together with a transitional arrangement, with the commencement of the Tax Laws Amendment (Research and Development) Act 2011. The purpose of the provision remains the same: the registration requirement ensures the service provider has a minimum standard of capability.
The commencement date for the provision is 1 July 2012. An earlier commencement date is not required due to transitional arrangements in the Tax Laws Amendment (Research and Development) Act 2011. The transitional arrangements removed the need for re-registration, under the new section 29A of the Industry Research and Development Act 1986, of entities that were registered under former section 39F of the Industry Research and Development Act 1986 immediately before the commencement of the Tax Laws Amendment (Research and Development) Act 2011.
As the purpose of the retrospective commencement of this provision is to ensure that registrations that occur for the 2012-13 financial year are also recognised for BIC Scheme purposes, the amendment does not cause disadvantage or detriment to a BIC Scheme claimant or any other person.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Clothing and Household Textile (Building Innovative Capability) Amendment scheme 2012 (No.1)
This Legislative Instrument (the Instrument) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The purpose of this instrument is to make consequential amendments to the BIC Scheme following the enactment of the Tax Laws Amendment (Research and Development) Act 2011. This Act was one of the legislative mechanisms by which the former Research and Development Tax Concession was replaced by the new R&D Tax Incentive.
The opportunity has also been taken to insert some Notes, and to improve the wording of an existing Note, so that readers can appreciate the context of provisions more readily and locate reference documents more quickly.
Human rights implications
The provisions contained in this instrument do not engage or impinge upon any of the rights and freedoms recognised in the seven core international human rights treaties which Australia has ratified.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.