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Guides & Guidelines as made
This Guideline sets out the criteria for the inclusion of a government body or an associate of a government body on the Register of Commercial Government Bodies so as to enable a company that incurs certain expenditure to the government body or to its associate to claim a tax deduction for such expenditure.
Administered by: Industry
Registered 05 Feb 2009
Tabling HistoryDate
Tabled HR09-May-1995
Tabled Senate10-May-1995
Gazetted 26 Apr 1995
Date of repeal 19 Mar 2014
Repealed by Spent and Redundant Instruments Repeal Regulation 2014

 

 

Industry Research and Development Board Guideline

 

INCLUSION ON THE REGISTER
OF COMMERCIAL GOVERNMENT BODIES

 

INTRODUCTION

 

  1. This Guideline is issued pursuant to section 39HB(1) of the Industry Research and Development Act 1986 (the IRDA).

 

  1. The Research and Development (R&D) Tax Concession is the cornerstone of the Government’s suite of innovation support programs designed to make Australian industry more internationally competitive.

 

  1. This incentive enables eligible companies to claim up to 150% of eligible R&D expenditure as a tax deduction against assessable income.

 

 

REGISTER OF COMMERCIAL GOVERNMENT BODIES

 

  1. Where a company incurs expenditure to a government body, or an associate of a government body, and the expenditure is structured such that the company will receive a "guaranteed return" on that expenditure [(see section 73CA of the Income Tax Assessment Act 1936 (the Act)] section 73CB of the Act operates to deny a deduction for that expenditure.

 

  1. However, where the government body or its associate is entered on the "Register of Commercial Government Bodies" then the provisions of section 73CB will not apply.

 

  1. Organisations seeking Commercial Government Body status must submit an application to the Industry Research and Development Board (the Board) addressing the registration criteria.

 

REGISTRATION CRITERIA

 

  1. In developing the criteria the Board has taken the view that only those government bodies that are and remain similar in both their manner of operation and operating environment to a private sector company will be considered for inclusion on the Register.  As a general statement of principle, the Board would not accept that adoption of performance criteria and performance monitoring by the government body is a significant indicator that it is fully commercial and therefore eligible for inclusion on the Register.

 

  1. In making a decision as to whether a government body is eligible for inclusion on the Register, the Board will have regard to but will not be limited to the following criteria:

 

 

·         the relationship between the organisation and government;

·         the commercial environment in which the government body operates;

·         the manner in which the operation and performance of the body is scrutinised;

·         the extent to which the body is subject to Commonwealth, State or Territory regulations, charges and taxes;

·         the extent and nature of private investment in the government body;

·         if the body is established under State, Territory or Commonwealth law, the policy of the relevant government on treating the body as fully commercial;

·         whether the government body has lodged or is associated with an application for a research and development syndicate under section 39L of the IRDA; and

·         the composition of the Board of management of the body.

 

9.      ANY GOVERNMENT BODY THAT IS EXEMPT FROM COMMONWEALTH INCOME TAX WILL NOT BE ELIGIBLE FOR INCLUSION ON THE REGISTER.

Application of the Eligibility Criteria

 

10.    As a general statement concerning the application of the Guideline, the Board will adopt an        holistic approach looking at all aspects of the operation of a government body.


Relationship between government and the organisation

 

  1. This criterion requires that the government's relationship with the organisation typifies that of a shareholder.  This will require that the organisation is expected to pay dividends and to enhance shareholder value.


Commercial Operating Environment

 

  1. This criterion requires that the government body operate in a product or service market that is open to competition from other, private sector companies (whether or not such competition actually exists) and that it conduct its business in a manner that is consistent with generally accepted commercial standards and is recognised as being for the purpose of generating a profit.


Scrutiny of Performance

 

  1. This criterion requires that the performance of the government body be subject to a similar level of public scrutiny as privately owned and operated companies, including operation in accordance with Australian Accounting Standards and publication of fully audited financial statements in annual reports.


State, Territory and Commonwealth Regulations, Charges and Taxes.

 

  1. This criterion requires that the government body would be subject to essentially the same charges, business regulations and taxes as their private sector counterparts.  In other words, the government body should be required to comply with the normal regulations that apply to a privately owned and controlled company operating in the same market.  Minor technical differences in the detail of charges or taxes applying to a government body from those which apply to its private sector counterparts, and which are of no commercial significance, will not disqualify a government body under this criterion.


Source of Capital

 

  1. This criterion refers to the extent to which the organisation is restricted or otherwise in its ability to raise additional capital.  The key issue is whether the organisation is  normally able to access government sources to obtain additional funds or whether it is reliant on market-based sources. Government bodies that have either limited or no ability to raise additional  capital from conventional market sources would  be unlikely to be considered for inclusion on the Register.


Extent of Private Investment

 

  1. While this criterion does not establish any benchmark in terms of a minimum acceptable level of private investment, it would be generally accepted that the presence of private shareholdings would indicate a genuine interest in and attempt to operate on a commercial basis.  Statements from relevant government authorities that increased private ownership of a particular government body is a priority issue would also be taken into account.


Government Policy

 

  1. Where the government body is established under a law of a State, Territory  or the Commonwealth, a statement from the relevant policy making body to the effect that it is now policy of the relevant arm of government that the organisation will operate in a fully commercial manner may provide further support for the claim that the organisation is a commercial organisation.


R&D Syndicate Proposal

 

  1. In order to avoid unnecessary claims by organisations for inclusion on the Register, the Board will only consider applications by government bodies that are actively seeking to establish or participate in a research and development syndicate that will require, as part of the registration criteria, that the organisation be included on the Register of Commercial Government Bodies.


Other Factors

 

  1. The Board will not be limited to the above criteria in making a determination as to the eligibility of a government body for inclusion on the Register. Where necessary, the Board will seek additional information from the applicant organisation to ensure that the decision reached is both fair and equitable and made on the basis of full information.


FURTHER INFORMATION

 

  1. More detailed information can be found in:

 

·          150% Tax Incentive - Guide to Benefits

·          Section 73B of the Income Tax Assessment Act 1936

·          Part IIIA of the Industry Research and Development Act 1986

 

Or by contacting the Board either in writing or by telephone as set out below:

 

The General Manager

Tax Concession Program

Department of Industry, Science and Technology

 

GPO Box 2704                                      51 Allara Street

CANBERRA   ACT  2601                    CANBERRA  ACT  2601

 

Phone:  (06) 276 1190                                        Fax:  (06) 276 1091

                     13 2846

 

 

 

Dated this 12th day of April 1995.

 

John Plunkett

Chairman

Industry Research and Development Board