DEVELOPMENT ALLOWANCE AUTHORITY ACT 1980 (ARCHIVE)

CHAPTER 2 - DEVELOPMENT ALLOWANCE  

PART 1 - PRELIMINARY  

SECTION 5 (ARCHIVE)   EXAMPLE OF HOW THIS CHAPTER WILL WORK  

5(1)   Typical example - new factory.  

This section sets out an example of how this Chapter will work in a typical case involving the establishment of a new factory.

5(2)   Step 1 - proposal to establish a new factory.  

During the 3rd quarter of 1992, a manufacturing company develops a serious, commercially viable proposal to carry out a project consisting of the establishment of a new factory in Australia. The project involves the company incurring expenditure in acquiring new plant for use in the factory. The elements of the plant expenditure are:

• major items of plant ``A'', ``B'' and ``C'', which are the main components of the production line; and

• ancillary items of plant (such as light fittings, ventilation equipment and pollution control devices).

The factory will be used by the company to produce goods for sale. The company will derive assessable income from the sale of the manufactured goods. Both the effective and nominal rates of industry assistance are less than 10%. The total capital cost of the project (including the plant expenditure and the cost of constructing the factory building) is $65 million. The projected timetable for the project is as follows:

• regulatory approvals obtained - March 1993

• first contracts entered into - April/May 1993

• construction of factory commences - June 1993

• plant installed in factory - May 1994

• factory in operation - June 1994.

5(3)   Step 2 - application for registration of plant expenditure.  

On 20 November 1992, the company applies to the DAA for registration of the plant expenditure proposed to be incurred by the company in carrying out the project.

5(4)   Step 3 - grant of registration of plant expenditure.  

The DAA grants registration. The registration is subject to a condition requiring the company to give to the DAA, before 1 July 1995, certified copies of the relevant regulatory approvals.

5(5)   Step 4 - application for pre-qualifying certificate relating to plant expenditure.  

By October 1993, a substantial commitment to the completion of the project has occurred and the company has complied with the condition of the registration relating to the giving of certified copies of relevant regulatory approvals. It is reasonably likely that the competitiveness test set out in Division 4 of Part 2 will be passed. On 28 October 1993, the company applies to the DAA for a pre-qualifying certificate in relation to the registered plant expenditure.

5(6)   Step 5 - grant of pre-qualifying certificate relating to plant expenditure.  

The DAA grants a pre-qualifying certificate relating to the plant expenditure.

5(7)   Step 6 - tax effects of certificate.  

The pre-qualifying certificate pre-qualifies the plant expenditure for the tax incentive known as development allowance.