Taxation Laws Amendment Act (No. 4) 1994 (181 of 1994)

Schedule 4   AMENDMENTS RELATING TO RESEARCH AND DEVELOPMENT ACTIVITIES

Part 1   INDUSTRY RESEARCH AND DEVELOPMENT ACT 1986

3   After section 39EA

Insert:

Guidelines concerning overseas research and development activities

"39EB. (1) The Board must, as soon as practicable (and, in any event, within 90 days) after the commencement of this section, formulate written guidelines setting out the criteria to be met by eligible companies wishing to obtain a provisional certificate under section 39ED in relation to overseas research and development activities proposed to be carried on by them as part of projects of research and development activities.

"(2) The Board must cause the guidelines to be:

(a) published in the Gazette; and

(b) made available on request, without charge, to any eligible company.

"(3) The criteria to be set out in the guidelines must include the following criteria:

(a) it must be shown that the proposed overseas research and development activities cannot be carried out in Australia or the external Territories;

(b) it must be shown that the results of the overseas research and development activities will be exploited by the eligible company concerned for the benefit of the Australian economy;

(c) it must be shown that the expenditure:

(i) that is proposed to be incurred by the eligible company in respect of the overseas research and development activities; and

(ii) in respect of which the company proposes to claim a deduction under section 73B of the Income Tax Assessment Act 1936;

will not exceed 10% of the total expenditure that the company has incurred or proposes to incur on the project of research and development activities.

"(4) An instrument formulating guidelines under subsection (1) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

Applications for provisional certificates

"39EC. (1) An eligible company that proposes to incur expenditure in carrying on overseas research and development activities in respect of which it proposes to claim a deduction under section 73B of the Income Tax Assessment Act 1936 may apply to the Board for a provisional certificate in respect of the activities.

"(2) The application must:

(a) be in writing; and

(b) describe the project to which the proposed activities relate; and

(c) describe the proposed activities; and

(d) state the respective amounts of expenditure proposed to be incurred by the company on the project that relate to:

(i) Australian research and development activities; and

(ii) overseas research and development activities; and

(iii) if the company proposes to claim a deduction under section 73B of the Income Tax Assessment Act 1936 in respect of part only of the expenditure on overseas research and development activities - the amount of that part of the expenditure; and

(e) be accompanied by any other information that the Board reasonably requires.

Board's decision on application for provisional certificate

"39ED. (1) After considering an application under section 39EC, the Board must decide to:

(a) grant the application; or

(b) refuse the application.

"(2) If the Board has not made a decision under subsection (1) before whichever time (the 'eligible time') is the later of the following times:

(a) the end of the period (the 'original 90-day period') of 90 days after the day on which the application was received by the Board;

(b) if the Board, by written notice given to the applicant within the original 90-day period, requests the applicant to give further information about the application - the end of the period of 90 days after the Board receives the further information;

then, at the eligible time, the Board is taken to have made a decision under subsection (1) to refuse the application.

"(3) If the Board makes a decision under subsection (1) before the eligible time, the Board must give written notice of the decision to the applicant.

"(4) A notice under subsection (3) relating to a refusal must set out the reasons for the refusal.

"(5) The Board must not grant the application unless the Board is satisfied that the applicant meets the criteria set out in the guidelines formulated under section 39EB.

"(6) If the Board grants the application, it must give to the applicant a provisional certificate in respect of the activities to which the application relates.

Matters to be contained in provisional certificate

"39EE. (1) A provisional certificate given to an eligible company under section 39ED must:

(a) describe the overseas research and development activities to which the certificate relates; and

(b) contain a description of the project of research and development activities to which those overseas research and development activities relate; and

(c) state the amount of proposed expenditure on overseas research and development activities in respect of which the company proposes to claim a deduction under section 73B of the Income Tax Assessment Act 1936; and

(d) contain any other matters that the Board considers relevant.

"(2) After a provisional certificate is given to a company under section 39ED, the company may apply in writing to the Board for the certificate to be amended so as to vary either or both of the following:

(a) the description of the overseas research and development activities;

(b) the amount of the proposed expenditure on overseas research and development activities in respect of which the company proposes to claim a deduction under section 73B of the Income Tax Assessment Act 1936.

"(3) If:

(a) such an application is made; and

(b) the provisional certificate is produced to the Board; and

(c) the Board is satisfied that it is appropriate to amend the certificate having regard to the criteria set out in the guidelines formulated under subsection 39EB(1);

the Board may amend the certificate accordingly and return the amended certificate to the company.".