This Scheme is the ACIS Stage 2 Motor Vehicle Producer Research and Development Scheme 2004.

This Scheme commences on the date of its notification in the Gazette.

The object of this Scheme is to increase the amount of research and development undertaken by MVPs in Australia.

In this Scheme:

Act means the ACIS Administration Act 1999.

application round means the period of time within which applications for credits under this Scheme are called for, received and finalised.

Assessment Panel means an Automotive Committee of the Board, or the Board itself, whichever body is making recommendations to the Secretary on the merit of proposed R&D projects.

Australian‑based research and development has the meaning given by regulation 3 of the ACIS Administration Regulations 2000.

Board means the Industry Research and Development Board established by the Industry Research and Development Act 1986.

Department means the Department administered by the Minister.

eligible R&D activity has the meaning given by subsection 5 (1).

eligible R&D expenditure has the meaning given by section 6.

eligible R&D project has the meaning given by subsections 5 (2), (4) and (5).

funded project means an eligible R&D project to which credits are issued for eligible R&D activities under section 16 and in relation to which there is a funding agreement.

funding agreement means an agreement under section 19 in relation to an eligible R&D project.

funding year means a calendar year in which an eligible R&D project may receive type J duty credits.

merit criteria means the criteria mentioned in sections 21 to 24.

Minister means the Minister administering the Act.

offshore research and development has the meaning given by regulation 3 of the ACIS Administration Regulations 2000.

quarterly return means a return under section 35 of the Act.

R&D means research and development.

R&D expenditure base, for a year, means the average of an MVP’s eligible R&D expenditure for R&D activities undertaken in Australia or overseas (other than funded projects) for the 3 previous years.

Scheme total means the amount of credits available under this Scheme under section 8.

year means calendar year.

Note ACIS, ACIS year, modulated credit, motor vehicle producer, MVP, participant, quarter, sales value, Secretary, type C investment, type J investment, unmodulated type J investment credit and unmodulated uncapped production credit are defined in section 6 of the Act.

5 Eligible R&D activity and eligible R&D project

(1) An eligible R&D activity is an activity:

(a) that is systematic, investigative or experimental; and

(b) that involves innovation or technical risk; and

(d) that:

(i) involves R&D activities undertaken in Australia; and

(ii) may involve R&D activities undertaken overseas; and

(e) the object of which is the acquisition of new knowledge, creating new or improved materials, products, devices or new production processes; and

(f) that is directly related to the design, development, engineering or production of motor vehicles, engines, engine components, automotive components, automotive machine tools or automotive tooling.

(2) A project is an eligible R&D project only if the project includes 1 or more eligible R&D activities.

(3) The following are not eligible for credits as part of an eligible R&D project:

(a) the design of a building (whether or not the building is to be used to house a R&D activity);

(b) the design and installation of financial management systems;

(d) routine quality control;

(e) management studies or efficiency surveys;

(f) routine collection of information (other than for the purpose of R&D);

(g) the acquisition from another participant of technology or the rights to use technology;

(h) the protection of industrial property rights by legal action;

(i) test and evaluation once a prototype becomes a production model;

(j) staff selection systems;

(k) the sale by an MVP of existing know‑how, including off‑the‑shelf computer software that can be applied without modification to the needs of persons other than the MVP;

(l) the sale by an MVP of training services;

(m) an activity for which type C investment is claimed under the Act.

(4) An eligible R&D project may include R&D performed under a contract for the MVP by a person other than an MVP.

(5) An eligible R&D project may include offshore research and development of not more than 20% of the eligible R&D expenditure for the project.

(6) If an MVP undertakes an eligible R&D project as a joint‑venture between the MVP and another party, the MVP must not claim R&D costs for the project that are incurred by the MVP’s joint‑venture partner.

Note Under section 31, a participant that is not an MVP must not claim ACIS credits for activities claimed by MVPs under this Scheme.

6 Eligible R&D expenditure

(1) In this Scheme, eligible R&D expenditure, for an activity, means:

(a) the maximum claimable value for R&D for the activity; and

(b) expenditure incurred on or after 1 October 2005 and on or before 30 September 2010.

(2) In this Scheme, the method of calculating the maximum claimable value for R&D is the same as the method of calculating the maximum claimable value for allowable research and development set out in regulation 13H of the ACIS Administration Regulations 2000.

(3) In this Scheme, labour costs and the costs of recruitment, training and development must be determined in the way set out in regulation 13I of the ACIS Administration Regulations 2000.

7 Allowed kinds of research and development

For paragraph 60A (2) (a) of the Act, the kind of research and development undertaken by MVPs that is allowed for the purposes of this Scheme is eligible R&D activities.

8 Amount of credits available under this Scheme

For paragraph 60A (2) (b) of the Act, the amount of credits available to be issued under this Scheme is $142.8 million.

9 Intellectual property

An MVP may apply for credits under this Scheme whether or not the intellectual property in the project is owned by a company incorporated outside Australia.

10 Administration of Scheme

The Department:

(a) must undertake the day to day administration of this Scheme, including the administration of the application and assessment processes and monitoring the performance of MVPs against funding agreements; and

(b) may make recommendations to the Secretary.

Part 2 Issue of credits

Division 1 Application rounds

11 Application rounds

(1) The Secretary must ensure that there are at least 2 application rounds.

(2) The Secretary may issue a total of not more than $75 million in credits to an MVP over all application rounds.

(3) The Secretary may issue a total of not more than $90 million in credits in the first application round.

(4) After the completion of an application round, the Secretary may issue the balance of the Scheme total in credits in subsequent application rounds.

Division 2 Application for credits

12 Call for applications

The Secretary must call for applications for credits at the beginning of each application round.

13 Application for credits

(1) An MVP registered under ACIS may make an application for credits for a proposed R&D project.

(2) An MVP may make only 1 application in each application round.

(3) An application:

(a) may include 1 or more proposed R&D projects; and

(b) must be made in the form approved by the Secretary; and

(i) the estimated R&D expenditure base for the first funding year of the project;

(ii) the project’s claims against the merit criteria.

Division 3 Assessment of applications

14 Decision — eligible R&D project

(1) If the Secretary receives an application under section 13, the Secretary must consider the application and decide, on reasonable grounds, whether each proposed R&D project included in the application is an eligible R&D project.

(2) In making a decision under subsection (1), the Secretary may seek further information from the applicant, in writing or through interviews with the applicant.

(3) The applicant must meet all costs associated with providing information to the Secretary.

(4) If the Secretary decides that a proposed R&D project is not an eligible R&D project, the Secretary must:

(a) refuse the application in respect of the project; and

(b) give the applicant written notice of the refusal, including:

(i) a statement of reasons for the decision; and

(ii) a statement to the effect that the applicant may apply for administrative review of the decision under section 34.

(5) If the Secretary decides that a proposed R&D project is an eligible R&D project, the Secretary must refer the application in respect of the project to the Assessment Panel.

15 Recommendation and ranking by Assessment Panel

(1) The Assessment Panel must, for each eligible R&D project referred to it by the Secretary in an application round:

(a) assess the project against the merit criteria in accordance with Division 4; and

(b) rank the project in accordance with section 25.

(2) In assessing the merit of a project or determining its rank, the Assessment Panel may seek further information from the applicant, in writing or through interviews with the applicant.

(3) The applicant must meet all costs associated with providing information to the Assessment Panel.

16 Decision on application

(1) In deciding whether to issue credits for an eligible R&D project, the Secretary must consider:

(a) the assessment and ranking for the project provided by the Assessment Panel; and

(b) the amount of credits that is available in the application round and the Scheme; and

(d) whether the total amount of modulated credit, unmodulated uncapped production credit and unmodulated type J investment credit issued to the MVP in the year has exceeded 5% of the sales value of the MVP’s ACIS goods and services in respect of the previous year; and

(e) the object of this Scheme.

(2) The Secretary may decide to issue credits for specified eligible R&D activities within an eligible R&D project.

(3) The Secretary must not decide to issue credits for an activity mentioned in subsection 5 (3) within the project.

17 Amount of credits

If the Secretary decides to issue credits for an eligible R&D project, the Secretary must decide the value of the credits to be issued for the project.

Note Paragraph 60A (2) (c) of the Act provides that this Scheme may include guidelines for working out the amount of unmodulated type J investment credit available to be issued to an MVP in respect of a quarter. It is intended that such guidelines will be included in this Scheme in the future.

It is intended that the guidelines will provide that the Secretary must decide to issue credits to a value equal to 45% of the eligible R&D expenditure for a project for the quarter until 1 of the following occurs:

(a) the value of credits issued in the first application round reaches $90 million;

(b) the value of credits issued under this Scheme to the MVP reaches $75 million;

(c) the issue of the credits to the MVP in an ACIS year would result in the total amount of modulated credit, unmodulated uncapped production credit and unmodulated type J investment credit issued to the MVP exceeding 5% of the sales value of the MVP’s ACIS goods and services in respect of the previous year;

(d) the value of credits issued reaches the Scheme limit.

It is also intended that the guidelines will provide that if a proposed project receives funding under a Commonwealth grant scheme, other than:

(a) credits under this Scheme; or

(b) an amount of Commonwealth assistance that is not financial assistance for section 11 of the Act as explained in the ACIS Administration (Commonwealth Financial Assistance) Determination 2000;

the Secretary must deduct the value of the funding provided under the other scheme from the amount of credits that the Secretary issues to the project.

18 Notice of decision and offer of credits

(1) The Secretary must give the applicant for each project referred to the Assessment Panel written notice of his or her decisions under sections 16 and 17 for the project.

(2) A notice under subsection (1) in relation to a decision not to offer credits for an eligible R&D project must include:

(a) a statement of reasons for the decision; and

(b) a statement to the effect that the applicant may apply for administrative review of the decision under section 111 of the Act.

(3) If the Secretary has decided to offer credits for an eligible R&D project, the Secretary must include with the notice:

(a) a written offer of credits, including the level of funding; and

(b) a statement to the effect that the applicant may apply for administrative review of the decision in relation to the amount of credit offered under section 111 of the Act.

(4) The applicant must give the Secretary written notice of the applicant’s acceptance or rejection of the offer of credits within 30 days after receiving the offer.

(5) The applicant may reject the offer of credits.

19 Agreement with the Commonwealth

(1) If an applicant accepts an offer of credits under section 18, the Secretary and the applicant must, within 90 days after the Secretary receives the notice of acceptance, try to make an agreement.

(2) An agreement must set out the terms of the agreement and the roles and responsibilities of each party in relation to the project.

(3) If the parties cannot agree on the terms of the agreement within 90 days after the Secretary receives the notice of acceptance, the Secretary may withdraw the offer of credits for the project.

20 Issuing credits

(1) The Secretary may issue credits on or after 1 January 2006 and on or before 31 December 2010.

(2) The Secretary must, as soon as practicable after receiving a quarterly return from an MVP for a quarter, work out the amount of unmodulated type J investment credit to be issued to the MVP for the quarter in accordance with the formula:

where E means the eligible R&D expenditure for all funded projects being undertaken by the MVP in the quarter.

(3) The Secretary must issue credits for a funded project to the MVP undertaking the project quarterly in arrears as soon as practicable after the receipt of a quarterly return.

Note Under section 36 of the Act, an MVP’s quarterly return must include details of type J investment undertaken by the MVP and details of Commonwealth assistance received by the MVP in the quarter. These details will enable the Department to determine the amount of ACIS type J duty credits payable to the MVP for the quarter.

(4) The Secretary must not issue to an MVP more credits in relation to a funded project than the maximum stated in the funding agreement for the project.

(5) If, under section 29, the Secretary approves a variation to a funded project, and the funding agreement for the project is varied, the Secretary must not issue to the MVP more credits in relation to the project than the maximum stated in the original funding agreement.

Division 4 Merit criteria

21 Merit criterion 1: the calibre of new R&D activity that will be generated in Australia by the eligible R&D project

(1) The Assessment Panel must assess the calibre of new R&D activity that will be generated in Australia by the eligible R&D project.

(2) In assessing the calibre of new R&D activity to be generated by the project, the Assessment Panel must determine whether the project:

(a) involves an entirely new line of R&D, and is additional to the applicant’s existing R&D expenditure base; or

(b) enables the further development of a current line of R&D, and is additional to an applicant’s existing R&D expenditure base; or

(d) does not meet paragraph (a), (b) or (c).

(3) The Assessment Panel must:

(a) regard a project that meets paragraph (2) (a) more highly than a project that meets paragraph (2) (b); and

(b) regard a project that meets paragraph (2) (b) more highly than a project that meets paragraph (2) (c); and

Note In an application for credits under this Scheme, each applicant will be required to state whether the proposed project meets paragraph (2) (a), (b) or (c). The Assessment Panel must determine whether the project meets paragraph (2) (a), (b), (c) or (d). It is possible that the Assessment Panel’s determination may differ from the applicant’s assessment of the project.

22 Merit criterion 2: the technical merit of the eligible R&D project

(1) The Assessment Panel must assess the technical merit of the eligible R&D project.

(2) In assessing the technical merit of the project, the Assessment Panel must consider the following:

(a) the extent to which the project suggests scope for future growth beyond the time‑frame of the project;

(b) the extent to which the project involves leading edge technologies, techniques or skills for Australia;

(d) the extent to which the project is world class in nature;

(e) the degree of innovation evident in the project;

(f) the extent to which the project will create new or improved linkages along the value chain with Australian suppliers;

(g) the extent to which the applicant will extend existing, or forge new links with research institutions;

(h) the facilities and research infrastructure available to the applicant, and the capabilities of the personnel to be involved (including the facilities and personnel of contract partners);

(i) whether the applicant has provided a clear and detailed R&D plan including commercialisation strategies.

23 Merit criterion 3: the level of benefit, including environmental benefit to the wider Australian community of the eligible R&D project

(1) The Assessment Panel must assess the economic and environmental benefits likely to result from the eligible R&D project.

(2) In assessing the economic and environmental benefits likely to result from the project, the Assessment Panel must consider the following:

(a) the extent to which the project enhances or strengthens the Australian automotive industry’s capabilities (for example, by filling a gap in the value chain, developing expertise, or introducing new skills);

(b) the extent to which there is potential for benefit to other Australian industries as a result of the applicant’s introduction of new transferable skills, knowledge, technologies or techniques;

(c) the extent to which the project utilises Australian capabilities, resources and inputs including Australian‑developed intellectual property;

(d) the extent to which the project contributes to Australia’s environmental savings.

24 Merit criterion 4: the contribution of the eligible R&D project to the sustainability of an internationally competitive automotive industry in Australia

(1) The Assessment Panel must assess the contribution to the sustainability of an internationally competitive automotive industry of the eligible R&D project.

(2) In assessing the contribution to the sustainability of an internationally competitive automotive industry of the project, the Assessment Panel must consider the following:

(a) the extent to which the project represents a commitment to doing business in Australia in the longer term, having regard to the applicant’s long‑term R&D and business strategy in Australia;

(b) the extent to which the project utilises and builds upon Australian industry’s strengths;

(d) the extent to which R&D facilities in Australia will be responsible for a higher proportion of the applicant’s global R&D as a result of the project.

25 Ranking

(1) After assessing each eligible R&D project in an application round against the merit criteria, the Assessment Panel must, subject to subsection (2):

(a) decide on a score for the project against each merit criterion; and

(b) establish a relative merit ranking for all projects based on the total score of the projects against the merit criteria.

(2) The Assessment Panel may decide to refuse to provide a ranking for a project if the Assessment Panel is not satisfied with the level of merit of the project in relation to 1 or more of the merit criteria.

(3) The Assessment Panel must:

(a) give the Secretary the assessment and relative merit ranking for each project that has a rank; and

(b) give the Secretary the assessment for projects without a rank.

Part 3 Monitoring of projects

26 Annual assessment

(1) The Department may, within 6 months after the end of a year in which an MVP received credits for a funded project, assess the MVP’s performance against the funding agreement for the project.

(2) If, in a year, an MVP undertook less than 75% of a funded project it had agreed to do in the year, credits allocated (but not issued to the MVP) for that project for future years must be returned to the Scheme.

(3) If an MVP’s R&D expenditure base for the first funding year of a project is more than 25% less than the estimated R&D expenditure base for the project given in the MVP’s application under section 11, credits allocated (but not issued to the MVP) for funded projects that were to be undertaken by the MVP in future must be returned to the Scheme.

27 Provision of information

Within 45 days after the end of the first funding year in which an MVP has received credits under this Scheme for a funded project, the MVP must give to the Department, details of the MVP’s R&D expenditure base for the year.

28 Managing carryover of project overspends or underspends

(1) An overspend in a year for a funded project may be carried forward in full for 1 year only.

(2) An overspend in a year for a funded project that is not used to offset an underspend in the previous year or the next year must be returned to the Scheme.

(3) An underspend in a year for a funded project may be carried forward in full for 1 year only, if, in the year in which the underspend arose, the MVP spent at least 75% of the amount of R&D expenditure the MVP had agreed it would spend on the project in the year (taking into account any earlier overspend carried forward).

(4) If in a year an MVP spends less than 75% of the amount of R&D expenditure the MVP had agreed it would spend on a funded project in the year (taking into account any earlier overspend carried forward), credits allocated (but not issued to the MVP) for expenditure in future for the project must be returned to the Scheme.

Note Under section 26, if, in a year, an MVP undertook less than 75% of a funded project it had agreed to do in the year, credits issued for that project for future years must be returned to the Scheme.

Part 4 Variation of agreement

29 Variation of agreement

(1) This section applies if:

(a) an MVP asks the Secretary to consider a variation of a funded project because the MVP is not able to undertake all of the activities for the project; or

(b) in the Secretary’s opinion, a funded project has been varied, and the Secretary has not approved the variation.

(2) If, in the Secretary’s opinion, the variation would not affect the assessment of the project by the Assessment Panel, the Secretary may approve the variation, or refuse to approve the variation, without consulting the Assessment Panel.

(3) If, in the Secretary’s opinion, a variation mentioned in paragraph (1) (a) would affect the assessment of the project by the Assessment Panel, the Secretary must ask the Assessment Panel to assess the effect of the variation on the relative merit of the project under the merit criteria.

(4) If, in the Secretary’s opinion, a variation mentioned in paragraph (1) (b) would affect the assessment of the project by the Assessment Panel, the Secretary must ask the Assessment Panel to provide a technical assessment of the progress reported by the MVP compared to the technical milestones specified in the funding agreement for the project.

(5) The Assessment Panel must conduct the assessment or technical assessment and recommend that the Secretary approve or refuse to approve the variation.

(6) After receiving the recommendation of the Assessment Panel, the Secretary must decide to approve or to refuse to approve the variation.

(7) The Secretary must give the MVP written notice of a decision under subsection (2) or (6), including, for a decision to refuse to approve a variation:

(a) a statement of reasons for the decision; and

(b) a statement to the effect that the applicant may apply for administrative review of the decision under section 34.

(8) If the Secretary refuses to approve the variation, and the project cannot continue to be funded under this Scheme without the variation being made, the issue of credits for the project must cease on a date determined by the Secretary.

(9) If the Secretary approves the variation, the Secretary and the MVP must vary the funding agreement for the project accordingly.

(10) A variation under subsection (9) takes effect from a date decided by the Secretary.

30 Return of credits

If an MVP has been issued credits for an R&D activity or expenditure that did not take place, or has claimed credits for an R&D activity or expenditure that was not part of a funded project:

(a) the credits must be returned to the Scheme to be made available for future rounds; and

(b) the MVP will incur an unearned credit liability in accordance with Part 9 of the Act.

Part 5 Claims by participants other than MVPs

31 Claims by participants other than MVPs

A participant that is not an MVP must not claim ACIS credits for activities claimed by MVPs under this Scheme.

Part 6 Miscellaneous

32 Publishing information

The Minister may publish the following information about a MVP that is, or was, a participant in this Scheme:

(a) that the MVP is, or was, a participant, and the period of the MVP’s participation in this Scheme;

(b) the amount of duty credit entered in the ACIS ledger in respect of the MVP’s participation in the Scheme in any 1 ACIS year;

33 Assessment of performance of Scheme

In assessing the performance of this Scheme in meeting its objective, the Department must consider:

(a) the quality of the R&D undertaken; and

(b) the amount and type of new R&D projects taking place in Australia; and

(d) the level of benefit to the Australian economy; and

(e) any other relevant matter.

34 Administrative review

An MVP may apply to the Administrative Appeals Tribunal for the review of a decision by the Secretary:

(a) that a proposed R&D project is not an eligible R&D project under subsection 14 (1); or

(b) to refuse to approve a variation to a funded project under subsection 29 (2) or (6).

Note Under paragraph 111 (j) of the Act, applications may be made to the Administrative Appeals Tribunal for review of a decision under this Scheme not to issue an MVP with unmodulated type J investment credit or as to the amount of any credit to be so issued.

Title	Date of notification in Gazette or FRLI registration	Date of commencement	Application, saving or transitional provisions
ACIS Stage 2 Motor Vehicle Producer Research and Development Scheme 2004	24 June 2004 (see Gazette 2004, No. S223)	24 June 2004
ACIS Stage 2 Motor Vehicle Producer Research and Development Scheme Variation 2006 (No. 1)	21 May 2007 (see F2007L01448)	1 Jan 2007	—

ad. = added or inserted am. = amended rep. = repealed rs. = repealed and substituted
Provision affected	How affected
Reader’s Guide.........	rep. 2006 No. 1
Part 1
S. 8.................	am. 2006 No. 1