House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)

GENERAL OUTLINE

This Bill will amend:

the Income Assessment Act 1936 -

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to modify the present arrangements for the concessional taxation treatment of research and development expenditure (proposals announced on 20 November 1987, in the Economic Statement of 25 May 1988, and in the Statement on Science and Technology of 8 May 1989) and, in particular:

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to extend, from 30 June 1991 to 30 June 1993, the present 150 per cent research and development deductions scheme, and to 30 June 1995 at a reduced rate of 125 per cent;

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to authorise a taxation deduction for an eligible company that becomes entitled to, or receives, a recoupment or receives a grant, in relation to its expenditure on a research and development project;

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to allow a company that has incurred qualifying plant expenditure in relation to a unit of plant to permit another person to use that plant for research and development activities without affecting the company's deduction entitlements;

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to give partnerships of eligible companies access to deductions for research and development expenditure;

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to extend to public trading trusts access to deductions for research and development expenditure;

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to authorise deductions akin to depreciation for expenditure on certain buildings used for carrying on research and development activities;

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to clarify the meaning of the definitions of 'pilot plant' and 'plant' in the research and development provisions;

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to terminate, from 30 June 1995, the special 100 per cent write-off for expenditure on scientific research;

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to modify the basis for calculating franking credits when a company tax assessment for the 1988-89 income year is served during the period 19 January 1989 to 30 June 1989 inclusive, instead of after the latter date (proposal announced on 18 January 1989);

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to provide an exemption from income tax for the pay and allowances earned by Defence Force personnel while allotted for duty in Namibia (proposal announced on 6 March 1989);

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to amend the capital gains and capital losses provisions so that where a taxpayer grants an eligible long term lease or sublease of land after 16 November 1988, the taxpayer may elect to have the provisions apply to the transaction on the basis that the grant of the lease or sublease is a disposal of the underlying freehold or leasehold interest in the land;

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to allow a deduction for expenditure incurred in the 1988-89 and subsequent income years in contesting an election for membership, or in being elected as a member, of the Legislative Assembly for the Australian Capital Territory;

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to repeal, with effect from 1 July 1991, the 100 percent deduction available for certain subscription monies paid in respect of initial shares in licensed Management and Investment Companies (1988 May Economic Statement announcement);

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to extend the exemption from the substantiation requirements relating to eligible transport payments so that substantiation of claims for allowable deductions against transport allowance payments will not be required where the claim is not more than the amount of the allowance that would have been payable as at 29 October 1986 (proposal announced on 28 April 1989);

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to require taxpayers who specify information in car records to retain those records for a period comparable with the period for which documentary evidence such as log books, odometer records and receipts must be retained;

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to require an employer to keep a copy of an employment declaration made by an employee for a period of twelve months after the close of the financial year during which the declaration ceases to have effect;

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to ensure that a person's tax file number is included on a group certificate or tax check sheet issued in respect of an eligible termination payment;

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make other minor technical amendments;

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the Sales Tax (Exemptions and Classifications) Act 1935 -

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to exempt from sales tax certain shipping containers of a kind for repeated use in containerised sea cargo transportation systems (proposal announced on 25 January 1989);

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the Taxation Administration Act 1953 -

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to permit the Commissioner of Taxation, in certain circumstances, to apply to a court of summary jurisdiction to have a conviction or order set aside for a prescribed taxation offence and the matter reheard;

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the Industry Research and Development Act 1986 -

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to empower the Industry Research and Development Board to certify conclusively to the Commissioner of Taxation as to whether activities by or on behalf of a person amount to the carrying on of research and development.