EXPLANATORY STATEMENT
Issued by the authority of the Minister for Industry, Science and Technology
Industry Research and Development Act 1986
Industry Research and Development (Manufacturing Modernisation Fund Program) Instrument 2019
Purpose and Operation
Section 33 of the Industry Research and Development Act 1986 (the IR&D Act) provides a mechanism for the Minister to prescribe programs, by disallowable legislative instrument, in relation to industry, innovation, science or research, including in relation to the expenditure of Commonwealth money under such programs.
The statutory framework provided by s33 of the IR&D Act enables a level of flexibility to provide authority for Commonwealth spending activities in relation to industry, innovation, science and research programs. This allows the Government to respond quickly and appropriately to the need to implement innovative ideas and pilot programs on an ongoing basis and as opportunities arise. Prescribing programs in legislative instruments provides transparency and parliamentary oversight of Government programs and spending activities, whilst reducing administrative burden on the Commonwealth.
Once a program is prescribed by the Minister under s33, subsection 34(1) allows the Commonwealth to make, vary or administer arrangements in relation to activities under the prescribed program. Arrangements may include contracts, funding agreements or other arrangements, and may provide for money to be payable by the Commonwealth to one or more third parties. The power conferred on the Commonwealth by subsection 34(1) may be exercised on behalf of the Commonwealth by a Minister or an accountable authority of a non-corporate entity, or by their delegate (under s36).
The purpose of the Industry Research and Development (Manufacturing Modernisation Fund Program) Instrument 2019 (the Legislative Instrument) is to prescribe the Manufacturing Modernisation Fund Program (the Program). Funding for the Program will be provided through the 2019-20 Appropriation Bills.
Funding authorised by this Legislative Instrument comes from Program 2: Growing Business Investment and Improving Business Capability, Outcome 1. Details will be set out in the Portfolio Additional Estimates Statements 2019-20, Industry, Innovation and Science Portfolio.
The Program provides $50 million as part of the Australian Government’s commitment to support small and medium enterprises (SMEs) in manufacturing to modernise, support jobs growth and a more highly skilled workforce in the manufacturing sector; and to support investment in efficient and transformative manufacturing processes by SMEs.
Under the $50 million Program, an estimated $20 million will be allocated to small grants ($50,000 to $100,000) to support investment in technologies including to improve efficiency, and an estimated $30 million will be allocated to larger grants ($100,000 to $1 million) to support transformative investments in technologies. For small grants, the grant amount will be up to 50 per cent of eligible project costs and for larger grants, the grant amount will be up to 25 per cent of eligible project costs. No more than 50 per cent of eligible project costs can be funded from Commonwealth, State, Territory or local government grants.
These grants will support projects that maximise employment outcomes, such as increasing jobs and creating a more highly skilled workforce.
The Program will be delivered by the Department of Industry, Innovation and Science’s Business Grants Hub, which is a specialised design, management and delivery body with extensive expertise and capability in delivering similar programs.
The Program is a competitive and merits based grants program. The Program is administered by the Department in accordance with the Commonwealth Grant Rules and Guidelines 2017 (http://www.finance.gov.au/sites/default/files/commonwealth-grants-rules-and-guidelines.pdf). Eligibility and merit criteria are outlined in the Program guidelines, available at business.gov.au.
Spending decisions will be made by the Program Delegate who is the AusIndustry General Manager responsible for administering the Program, taking into account the recommendations of an independent assessment committee.
The Program involves the allocation of finite resources between competing applicants. In addition, there is a robust and extensive assessment process, an enquiry and feedback process, and an existing complaints mechanism for affected applicants. Therefore, external merits review does not apply to decisions about the provision of grants under the Program.
Applications will be assessed against the eligibility criteria and merit criteria set out in the Program guidelines in two stages. Firstly, applications will be assessed by AusIndustry against the eligibility criteria. An independent assessment committee will then consider eligible applications against the merit criteria. This will include comparing the applications and scoring each application out of 100. The committee will be led by an independent industry chairperson and comprise representatives from the Australian Government. The committee may seek input from independent technical experts to inform their assessments.
Applications must address the eligibility and merit criteria, and provide relevant supporting information. The amount of detail and supporting evidence should be relative to the project size, complexity and funding amount requested. Larger and more complex projects should include more detailed evidence. To be competitive, applications must score highly against each merit criterion.
After considering the applications, the committee will make recommendations to the Program Delegate regarding those applications suitable for funding. The Program Delegate will make the final decision about which grants to approve, taking into consideration the committee’s recommendations, and the availability of grant funds. The Program Delegate will not approve funding if there are insufficient Program funds available across relevant financial years for the Program.
Both successful and unsuccessful applicants will be informed in writing. Unsuccessful applicants have an opportunity to discuss the outcome with the Department, and can submit a new application for the same or similar project in future funding rounds. Where this occurs, applicants should include new or more information to address the weaknesses identified in their previous application.
Persons who are affected by decisions or who have complaints about the Program will have recourse through the Department. The Department will investigate complaints about the Program in accordance with its complaints policy and procedures. If a person is not satisfied with the Department’s investigation, they may lodge a complaint with the Commonwealth Ombudsman.
Corporations power
Paragraph 51(xx) of the Constitution empowers the Parliament to make laws with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’ (together, constitutional corporations).
In Williams v Commonwealth (2014) 252 CLR 416 (Williams No 2), the High Court, considering s 32B of the Financial Management and Accountability Act 1997 (the FMA Act), held (at [50]) that:
A law which gives the Commonwealth the authority to make an agreement or payment of that kind is not a law with respect to trading or financial corporations. The law makes no provision regulating or permitting any act by or on behalf of any corporation.
However, the relevant provisions of the IR&D Act are substantially different to the provisions considered by the High Court in Williams No 2. Section 34 of the IR&D Act corresponds to section 32B of the FMA Act considered by the High Court in Williams No 2. However, the FMA Act contained no provision in terms equivalent to those of section 35 of the IR&D Act.
Subsection 35(2) of the IR&D Act limits the arrangements made under section 34 so that, where a party to an arrangement made under section 34 is a constitutional corporation, the arrangement must be subject to a written agreement containing terms and conditions under which money is payable by the Commonwealth. The corporation must comply with the terms and conditions. The activities of the corporation are therefore regulated through the terms and conditions made under each agreement pursuant to subsection 35(2).
Further, subsection 35(3) provides that the agreement must provide for circumstances in which the corporation must repay amounts to the Commonwealth.
The Program prescribed by the Legislative Instrument provides funding to successful applicants to support capital investments and upgrades, and to train employees on the use of new technologies and processes. The Instrument provides that the eligibility criteria relating to the program include the requirement that applicants must be trading or financial corporations to which paragraph 51(xx) of the Constitution applies. The Program imposes terms and conditions on the successful applicant under a grant agreement in accordance with section 35 of the IR&D Act, in relation to receipt of benefits under the Program.
Authority
Section 33 of the Industry Research and Development Act 1986 provides authority for the Legislative Instrument.
Consultation
In accordance with section 17 of the Legislation Act 2003, the Attorney-General’s Department has been consulted on this Legislative Instrument.
Regulatory Impact
It is estimated that the regulatory burden is likely to be minor (OBPR reference number 25737).
Details of the Industry Research and Development (Manufacturing Modernisation Fund Program) Instrument 2019
Section 1 – Name
This section specifies the name of the Legislative Instrument as the Industry Research and Development (Manufacturing Modernisation Fund Program) Instrument 2019.
Section 2 – Commencement
This section provides that the Legislative Instrument commences on the day after registration on the Federal Register of Legislation.
Section 3 – Authority
This section specifies the provision of the Industry, Research and Development Act 1986 (the Act) under which the Legislative Instrument is made.
Section 4 – Definitions
This item provides for definitions of terms used in the Legislative Instrument.
Section 5 – Prescribed program
This section prescribes the Manufacturing Modernisation Fund Program (the Program) for the purposes of section 33 of the Act.
The Program provides grants to co-fund capital investments in new technologies and associated reskilling in small and medium-sized businesses. The grants will assist businesses to modernise, adopt new technologies, improve productivity and support jobs growth.
Section 6 – Specified legislative power
This section specifies that the legislative power in respect of which the Legislative Instrument is made is the power of the Parliament to make laws with respect to trading or financial corporations formed within the limits of the Commonwealth (para 51(xx) of the Constitution).
Section 7 – Eligibility criteria relating to program
This section sets out the eligibility criteria relating to the Program for the purposes of subsection 33(4) of the Act. The eligibility criteria include that applicants must be trading or financial corporations to which paragraph 51(xx) of the Constitution applies.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Industry Research and Development (Manufacturing Modernisation Fund Program) Instrument 2019
This Legislative 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 the Manufacturing Modernisation Program is to increase the efficiency and innovative capability of manufacturing businesses by providing grants to help small and medium-sized businesses invest in new capital expenditure and associated reskilling.
The intended outcome of the program is to help businesses to grow, improve productivity and be globally competitive through capital expenditure in new technologies and efficiency investments.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
The Hon Karen Andrews MP
Minister for Industry, Science and Technology