1996

The Parliament of the
Commonwealth of Australia

HOUSE OF REPRESENTATIVES

(As read a third time)

Taxation Laws Amendment Bill (No. 3) 1996

No.      , 1996

A Bill for an Act to amend the law relating to taxation

9614940—1,140/20.11.1996—(149/96) Cat. No. 96 5516 1 ISBN 0644 481862
Contents
1	Short title	
2	Commencement	
3	Schedule(s)	
Schedule 1—Amendment of the Income Tax Assessment Act 1936: various measures	
Part 1—Tax rebate for low income aged persons	
Part 2—Rebatable annuities	
Part 3—Medical expenses rebate	
Part 4—Sale of mining rights	
Part 5—Equity investments in small‑medium enterprises	
Part 6—Co-operative companies	
Schedule 2—Amendment of the Income Tax Assessment Act 1936: tax exempt entities that become taxable	
Schedule 3—Amendment of the Development Allowance Authority Act 1992	
Schedule 4—Research and development activities	
Part 1—Amendment of the Income Tax Assessment Act 1936	
Division 1—Amendments to reduce the rate of deduction from 150% to 125%	
Division 2—Amendments relating to deductions for expenditure incurred by partnerships	
Division 3—Amendments to limit the period for amending assessments to give effect to provisions relating to deductions for expenditure on research and development activities	
Division 4—Amendments relating to deductions for interest payments	
Division 5—Amendments relating to feedstock expenditure	
Division 6—Amendments relating to core technology expenditure	
Division 7—Amendments relating to pilot plant	
Division 8—Amendments to clarify the meaning of research and development activities	
Part 2—Amendment of the Industry Research and Development Act 1986	

This Bill originated in the House of Representatives; and, having this day passed, is now ready for presentation to the Senate for its concurrence.
	L.M. BARLIN
	Clerk of the House of Representatives
House of Representatives
19 November 1996

A Bill for an Act to amend the law relating to taxation
The Parliament of Australia enacts:
1  Short title
		This Act may be cited as the Taxation Laws Amendment Act (No. 3) 1996.
2  Commencement
	(1)	Subject to this section, this Act commences on the day on which it receives the Royal Assent.
	(2)	Item 11 of Schedule 1 is taken to have commenced immediately after item 10 of that Schedule.
	(3)	Schedule 3 is taken to have commenced on 30 October 1995.
	(4)	Items 60 and 61 of Schedule 4 are taken to have commenced at 5.00 pm, by legal time in the Australian Capital Territory, on 23 July 1996.
3  Schedule(s)
		Subject to section 2, each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Amendment of the Income Tax Assessment Act 1936: various measures
Part 1—Tax rebate for low income aged persons
1  Before section 160AAA
Insert:
160AAAA  Tax rebate for low income aged persons
	(1)	A taxpayer who is an individual (other than in the capacity as trustee) is entitled to a rebate of tax in the taxpayer’s assessment in respect of income of a year of income of an amount (if any), ascertained in accordance with the regulations, if the taxpayer satisfies the conditions in subsections (2) and (3).
	(2)	The first condition is that, on at least one day during the year of income, the taxpayer:
	(a)	has reached pension age, within the meaning of the Social Security Act 1991; and
	(b)	has 10 years qualifying Australian residence or has a qualifying residence exemption for an age pension, within the meaning of the Social Security Act 1991; and
	(c)	is not in gaol.
	(3)	The second condition is that the taxpayer:
	(a)	has a taxable income for the year of income less than an amount ascertained in accordance with the regulations; and
	(b)	is not entitled to a rebate of tax for the year of income under section 160AAA.
	(4)	For the purposes of paragraph (3)(a), if the taxpayer is the spouse of another person, the taxable income of the taxpayer is taken to be half of the sum of:
	(a)	the taxable income of the taxpayer; and
	(b)	any share of the net income of a trust estate to which the spouse is presently entitled and that is assessed under section 98; and
	(c)	the actual taxable income of the spouse (reduced by any amount included in the spouse’s assessable income under section 100).
	(5)	Regulations made for the purposes of this section may be expressed to apply in relation to a year of income any part of which occurred before the notification of the regulations.
160AAAB  Tax rebate for low income aged persons—trustees assessed under section 98
	(1)	A taxpayer who is a trustee who is liable to be assessed under section 98 in respect of a beneficiary’s share of the net income of the trust estate is entitled to a rebate of tax in the trustee’s assessment in respect of income of a year of income of an amount (if any), ascertained in accordance with the regulations, if the conditions in subsections (2) and (3) are satisfied.
	(2)	The first condition is that, on at least one day during the year of income, the beneficiary:
	(a)	has reached pension age, within the meaning of the Social Security Act 1991; and
	(b)	has 10 years qualifying Australian residence or has a qualifying residence exemption for an age pension, within the meaning of the Social Security Act 1991; and
	(c)	is not in gaol.
	(3)	The second condition is that the beneficiary:
	(a)	has a taxable income for the year of income less than an amount ascertained in accordance with the regulations; and
	(b)	is not entitled to a rebate of tax for the year of income under section 160AAA.
	(4)	For the purposes of paragraph (3)(a), if the beneficiary is not the spouse of another person, the taxable income of the beneficiary is taken to be the beneficiary’s share of the net income of the trust estate.
	(5)	For the purposes of paragraph (3)(a), if the beneficiary is the spouse of another person, the taxable income of the beneficiary is taken to be half of the sum of:
	(a)	the beneficiary’s share of the net income of the trust estate; and
	(b)	any share of the net income of a trust estate to which the spouse is presently entitled and that is assessed under section 98; and
	(c)	the actual taxable income of the spouse (reduced by any amount included in the spouse’s assessable income under section 100).
	(6)	Regulations made for the purposes of this section may be expressed to apply in relation to a year of income any part of which occurred before the notification of the regulations.
2  Subsection 221YAB(1) (definition of qualifying rebates)
After “159SZ”, insert “, 160AAAA”.
3  Paragraph 221YDA(1)(da)
After “under section” (second occurring), insert “160AAAA, 160AAAB”.
4  Subparagraph 221YDA(2)(a)(ii)
After “under section” (second occurring), insert “160AAAA, 160AAAB”.
5  Application
(1)	The amendments of the Income Tax Assessment Act 1936 made by items 1 and 2 of this Schedule apply to assessments for the 1996-97 year of income and for all later years of income.
(2)	The amendments of the Income Tax Assessment Act 1936 made by items 3 and 4 of this Schedule apply in respect of the 1996-97 year of income and for all later years of income.

Part 2—Rebatable annuities
6  Subsection 27A(1) (paragraph (a) of the definition of qualifying annuity)
After “1987”, insert “, wholly with rolled-over amounts,”.
7  Subsection 27A(1) (subparagraph (b)(i) of the definition of qualifying annuity)
After “1987”, insert “wholly or partly with rolled-over amounts”.
8  Subsection 27A(1) (at the end of paragraph (c) of the definition of qualifying annuity)
Add “wholly or partly with rolled-over amounts”.
9  Application
The amendments made by this Part apply to annuities commuted, or that terminate, on or after 15 June 1996.

Part 3—Medical expenses rebate
10  Paragraph 159P(3A)(b)
Omit “$1,000”, substitute “$1,430”.
11  Paragraph 159P(3A)(b)
Omit “$1,430”, substitute “$1,500”.
12  Application
(1)	The amendment made by item 10 applies to assessments in respect of income of the 1996-97 year of income.
(2)	The amendment made by item 11 applies to assessments in respect of income of the 1997-98 year of income and for all later years of income.

Part 4—Sale of mining rights
13  Paragraph 23(pa)
After “assignment”(first occurring), insert “under a contract entered into on or before 31 December 1996,”.

Part 5—Equity investments in small‑medium enterprises
14  After Division 11A of Part III
Insert:
Division 11B—Equity investments in small‑medium enterprises
128TG  Summary of this Division
	(1)	The following is a summary of this Division.
	(2)	If, in connection with a money-lending business, a taxpayer is issued shares in a small‑medium enterprise, any profit or loss the taxpayer makes when it disposes of certain shares that would be dealt with under section 25 or 51 is, to the extent that it relates to the period after the issue, instead dealt with under Part IIIA (Capital gains and capital losses).
	(3)	For this to apply, the taxpayer must, after the issue, hold shares representing at least 10% of the paid up capital of the small‑medium enterprise.
128TH  When Division applies
		This section applies if:
	(a)	a taxpayer acquires a threshold interest in an SME (see section 128TJ); and
	(b)	afterwards, in the course of carrying on a business of lending money, or otherwise in connection with such a business, the taxpayer disposes of ordinary shares, or an interest in ordinary shares, in the SME that were issued to the taxpayer (whether before, at the time of, or after acquiring the threshold interest); and
	(c)	the shares are not trading stock of the taxpayer; and
	(d)	apart from this section:
	(i)	any profit on the disposal would be included in the taxpayer’s assessable income of a year of income under section 25; and
	(ii)	any loss on the disposal would be allowable as a deduction from the taxpayer’s assessable income of a year of income under section 51.
128TI  Consequences of Division applying
		If this section applies:
	(a)	no profit on the disposal is included in the taxpayer’s assessable income of any year of income under section 25; and
	(b)	no loss on the disposal is allowable as a deduction from the taxpayer’s assessable income of any year of income under section 51; and
	(c)	the taxpayer is taken:
	(i)	to have disposed of the shares, at the time of acquiring the threshold interest in the SME, for a consideration equal to their market value at the time; and
	(ii)	to have re‑acquired the shares immediately afterwards (for the purposes of this section, as if they had been issued to the taxpayer) for an amount equal to that consideration; and
	(d)	any profit or loss on the disposal that is taken to have happened by subparagraph (c)(i) is included in the taxpayer’s assessable income under section 25, or is an allowable deduction under section 51, in the year of income in which the shares are actually (disregarding that subparagraph) disposed of, and not in any other year of income.
Note:	As a result of this section, the tax consequences of the actual disposal will be dealt with under section 25 or 51 in respect of any period of holding before the acquisition of the threshold interest and under Part IIIA in respect of any period after the acquisition of that interest.
128TJ  Acquiring a threshold interest in an SME
		A taxpayer acquires a threshold interest in an SME if:
	(a)	in the course of carrying on a business of lending money, or otherwise in connection with such a business, ordinary shares in a company are issued to the taxpayer; and
	(b)	the company is an SME (see section 128TK) when the shares are issued; and
	(c)	immediately after the shares, and any other ordinary shares forming part of the same issue, are issued to the taxpayer and any other persons, the percentage of the total paid‑up capital of the company (assuming all amounts payable for the issue had been paid) represented by ordinary shares issued to the taxpayer (whether before or as part of the threshold share issue) is at least 10%; and
	(d)	no previous issue of shares to the taxpayer had resulted in the taxpayer acquiring a threshold interest in the SME.
128TK  SME or small‑medium enterprise
	(1)	An SME or small‑medium enterprise is a company the total value of whose assets, as determined under this section, is no more than $50 million.
	(2)	The total value of the company’s assets is the total value of its assets (both current and non-current) as shown in the last audited accounts prepared in relation to the company for the purposes of Division 4 of Part 3.6 of the Corporations Law of a State or internal Territory before the investment is made.
	(3)	If:
	(a)	no such audited accounts have been prepared within the 12 months ending when the shares are issued; or
	(b)	the last such audited accounts prepared relate to a period that ended more than 18 months before the shares are issued;
then the company is not an SME unless:
	(c)	before the shares are issued, the taxpayer gets an audited statement (see subsection (4)) showing the total value of the company’s assets as at a time no more than 12 months before the shares are issued; and
	(d)	that value is no more than $50 million.
	(4)	In subsection (3), an audited statement is a statement audited by a person or firm:
	(a)	who is appointed as the company’s auditor in accordance with the Corporations Law of a State or internal Territory; or
	(b)	who is eligible to consent to being so appointed.
15  Application
The amendment made by this Part applies where the taxpayer acquired the threshold interest in the SME on or after 1 July 1996.
16  Transitional—pre-1 July 1996 shares
For the purposes of Division 11B of the Income Tax Assessment Act 1936 as amended by this Part, any shares held by the taxpayer on or after 1 July 1996 that were issued to the taxpayer before 1 July 1996 are taken to be held instead by a person other than the taxpayer.

Part 6—Co-operative companies
17  Subsection 120(1)
Repeal the subsection, substitute:
	(1)	So much of the assessable income of a co-operative company as:
	(a)	is distributed among its shareholders as rebates or bonuses based on business done by shareholders with the company; or
	(b)	is distributed among its shareholders as interest or dividends on shares;
is an allowable deduction.
18  Application
(1)	Subject to subitems (2) and (3), the amendments of the Income Tax Assessment Act 1936 made by item 17 of this Schedule apply in relation to loans entered into after 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996.
(2)	The amendments of the Income Tax Assessment Act 1936 made by item 17 of this Schedule do not apply in relation to a loan to a co‑operative company if:
	(a)	the loan was entered into on or before 31 December 1996; and
	(b)	the loan was entered into for the sole purpose of acquiring a specified asset; and
	(c)	at or before 7.30 pm, by legal time in the Australian Capital Territory on 20 August 1996:
	(i)	the directors of the company had given approval to a business plan that anticipated the acquisition of the asset and that approval is recorded in the company’s minutes; or
	(ii)	the company entered into a contract to acquire the asset; and
	(d)	if subparagraph (c)(ii) does not apply—on or before 31 December 1996, the company entered into a contract to acquire the asset; and
	(e)	the asset is:
	(i)	plant or articles (for the purposes of section 54 of the Income Tax Assessment Act 1936); or
	(ii)	an eligible building (as defined in section 124ZF of that Act); and
		is not an eligible motor vehicle within the meaning of section 55 of that Act; and
	(f)	the asset is first installed ready for use by the company on or before 30 June 1998; and
	(g)	the company was, or will be, entitled to a deduction, under paragraph 120(1)(c), in the company’s assessment for a year of income, in relation to another loan, where that other loan was in existence at any time in the period starting on 20 August 1993 and ending at 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996.
(3)	The amendments of the Income Tax Assessment Act 1936 made by item 17 of this Schedule do not apply in relation to a loan to a co‑operative company if:
	(a)	the loan was entered into after 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; and
	(b)	at or before that time, the parties to the loan entered into an agreement (whether or not binding and whether or not for a specified amount) for the provision of finance; and
	(c)	the loan is entered into pursuant to that agreement and for the sole purpose of acquiring a specified asset; and
	(d)	at or before 7.30 pm, by legal time in the Australian Capital Territory on 20 August 1996, the company entered into a contract to acquire the asset.
However, if the acquisition of the asset ceases, at any time, to be the sole purpose of the loan, the amendments apply in relation to the loan after that time.
(4)	For the purposes of subitems (1), (2) and (3), a company is taken to have entered into a loan after a particular time if:
	(a)	the loan was entered into after that time; or
	(b)	the loan was entered into at or before that time but:
	(i)	the terms of the loan are altered after that time; or
	(ii)	the loan is rolled over after that time; or
	(iii)	the original period of the loan is extended after that time.
(5)	For the purposes of this item, the terms of a loan are taken to provide that the amount of the loan is equal to the sum of:
	(a)	any amounts borrowed, and not repaid, before the time set out in subitem (4); and
	(b)	any amount that has not been borrowed at that time but that the company is, at that time, under a contractual obligation to borrow.

Schedule 2—Amendment of the Income Tax Assessment Act 1936: tax exempt entities that become taxable
1  Before Schedule 3
Insert:
Schedule 2D—Tax exempt entities that become taxable
Division 57—Tax exempt entities that become taxable
Table of Subdivisions
Guide to Division 57
57-A	Key concepts
57-B	Predecessors of the transition taxpayer
57-C	Time when income derived
57-D	Time when losses and outgoings incurred
57-E	Assets and liabilities
57-F	Superannuation deductions
57-G	Denial of certain deductions
57-H	Domestic losses
57-I	Depreciation deductions
57-J	Capital allowances and certain other deductions
57-K	Balancing adjustments
57-L	Trading stock
Guide to Division 57
57-1  What this Division is about
This Division is about the income tax treatment of a taxpayer whose income ceases to be wholly exempt. Broadly, income, outgoings, gains and losses are attributed to the periods before and after the loss of full exemption.
Subdivision 57-A—Key concepts
57-5  Entities to which this Division applies
		If:
	(a)	at a particular time, all of the income of a taxpayer is wholly exempt from income tax; and
	(b)	immediately after that time, the taxpayer’s income becomes to any extent assessable income;
then:
	(c)	the taxpayer is a transition taxpayer; and
	(d)	the time when the taxpayer’s income becomes to that extent assessable is the transition time; and
	(e)	the year of income in which the transition time occurs is the transition year for the taxpayer.
Subdivision 57-B—Predecessors of the transition taxpayer
57-10  Activities of transition taxpayer’s predecessor attributed to transition taxpayer
	(1)	If:
	(a)	at the transition time, the transition taxpayer performs particular functions or carries on particular activities; and
	(b)	during any period before the transition taxpayer first began to perform the functions or carry on the activities, an exempt government entity performed those same functions or carried on those same activities; and
	(c)	at the end of the period, responsibility for performing the functions or carrying on the activities was transferred, either directly or through one or more other exempt government entities, to the transition taxpayer;
this Division applies as if, during that period, anything done by or to the exempt government entity in performing those functions or carrying on those activities had instead been done by or to the transition taxpayer.
Note:	As a result of this provision, the transition taxpayer may for example be able to deduct after the transition time, under Division 10 of Part III as modified by Subdivision 57-J, a portion of allowable capital expenditure incurred before the transition time by an exempt government entity whose functions were transferred to the transition taxpayer.
	(2)	An exempt government entity is:
	(a)	the Commonwealth, a State or a Territory; or
	(b)	an STB, within the meaning of Division 1AB of Part III, that is exempt from tax under that Division.
Subdivision 57-C—Time when income derived
57-15  Time when income derived
	(1)	To the extent that income derived by the transition taxpayer before the transition time is in respect of:
	(a)	services rendered; or
	(b)	goods provided; or
	(c)	the doing of any other thing;
at or after the transition time, the income is treated for the purposes of this Act as having been derived at the time the services were rendered, the goods were provided or the thing was done, as the case requires.
	(2)	To the extent that income derived by the transition taxpayer at or after the transition time is in respect of:
	(a)	services rendered; or
	(b)	goods provided; or
	(c)	the doing of any other thing;
before the transition time, the income is treated for the purposes of this Act as having been derived before that time.
Subdivision 57-D—Time when losses and outgoings incurred
57-20  Time when losses and outgoings incurred
	(1)	To the extent that a loss or outgoing (within the meaning of section 51) incurred by the transition taxpayer before the transition time is in respect of:
	(a)	services rendered; or
	(b)	goods provided; or
	(c)	the doing of any other thing;
at or after the transition time, the loss or outgoing is treated for the purposes of this Act as having been incurred at the time the services were rendered, the goods were provided or the thing was done, as the case requires.
	(2)	To the extent that a loss or outgoing (within the meaning of section 51) incurred by the transition taxpayer at or after the transition time is in respect of:
	(a)	services rendered; or
	(b)	goods provided; or
	(c)	the doing of any other thing;
before the transition time, the loss or outgoing is treated for the purposes of this Act as having been incurred before that time.
Subdivision 57-E—Assets and liabilities
57-25  Deemed disposal and re-acquisition of assets
	(1)	This section applies to the disposal of an asset by the transition taxpayer after the transition time, where the transition taxpayer owned the asset at all times from the transition time until the disposal.
Deemed disposal and re-purchase
	(2)	Subject to subsection (5), in determining:
	(a)	for the purposes of this Act (other than Part IIIA and the excluded provisions mentioned in subsection (4)) whether an amount is included in, or allowable as a deduction from, the assessable income of the transition taxpayer in respect of the disposal; or
	(b)	for the purposes of Part IIIA:
	(i)	whether a capital gain accrues to the transition taxpayer in respect of the disposal; or
	(ii)	whether the transition taxpayer incurs a capital loss in respect of the disposal;
the transition taxpayer is taken:
	(c)	to have sold, immediately before the transition time, each of its assets; and
	(d)	to have purchased each of its assets again at the transition time for consideration equal to the asset’s adjusted market value at the transition time.
	(3)	An asset’s adjusted market value at the transition time is the asset’s market value at that time:
	(a)	reduced by any amount of income received or receivable by the transition taxpayer in respect of the asset at or after the transition time that:
	(i)	because of subsection 57-15(2); or
	(ii)	because all of the income of the transition taxpayer was wholly exempt from income tax before the transition time;
		is not included in the transition taxpayer’s assessable income; and
	(b)	increased by any amount of income received or receivable by the transition taxpayer in respect of the asset before the transition time that:
	(i)	because of subsection 57-15(1); or
	(ii)	because the transition taxpayer’s income ceased to be exempt from income tax at the transition time;
		is included in the transition taxpayer’s assessable income.
Excluded provisions
	(4)	For the purposes of subsection (2), the excluded provisions are:
	(a)	sections 54 to 62AAV; and
	(b)	Divisions 10 to 10D of Part III; and
	(c)	Subdivision B of Division 3 of Part III.
Listed provisions not affected
	(5)	If the transition taxpayer:
	(a)	acquired an asset (whether before the transition time or otherwise) before the commencement of a provision listed in subsection (6); and
	(b)	after acquiring the asset, owned the asset at all times before the transition time;
the deemed acquisition of the asset under subsection (2) does not affect the operation of the listed provision.
Listed provisions
	(6)	The provisions are:
	(a)	section 26BB;
	(b)	section 26C;
	(c)	section 70B;
	(d)	Division 3B of Part III;
	(e)	Division 16E of Part III.
Avoidance of doubt—debt write-off
	(7)	To avoid doubt, an effect of subsection (2) is that the sum of all allowable deductions (if any) in respect of the writing off as bad of the whole or part of a debt to which that subsection applies will not exceed the market value of the debt at the transition time.
Avoidance of doubt—disposal need not involve an alienation
	(8)	To avoid doubt, an asset may be disposed of for the purposes of this section whether or not the disposal involves alienating the asset.
57-30  Deemed cessation and re-assumption of liabilities
	(1)	Subject to subsection (3), for the purposes of determining a deduction allowable to, or an amount included in the assessable income of, the transition taxpayer after the transition time in respect of the satisfaction of a liability owed by the transition taxpayer immediately before the transition time, the transition taxpayer is taken:
	(a)	to have ceased immediately before the transition time to have any liabilities; and
	(b)	to have assumed each of its liabilities again at the transition time in return for consideration equal to the adjusted market value (see subsection (2)) at that time of the right or other asset, corresponding to the liability, that was held by the person to whom the liability was owed.
	(2)	The adjusted market value of the corresponding right or other asset is the market value of that right or asset at the transition time:
	(a)	reduced by any amount paid or that becomes payable by the transition taxpayer in respect of the liability at or after the transition time, where:
	(i)	because of subsection 57-20(2); or
	(ii)	because all of the transition taxpayer’s income was wholly exempt from income tax before the transition time;
		the amount is not an allowable deduction; and
	(b)	increased by any amount paid or that became payable by the transition taxpayer in respect of the liability before the transition time, where:
	(i)	because of subsection 57-20(1); or
	(ii)	because the transition taxpayer’s income ceased to be exempt from income tax at the transition time;
		the amount is an allowable deduction.
	(3)	Division 3B of Part III only applies to a liability of the transition taxpayer at the transition time if the liability first came into existence after the day on which that Division commenced.
57-35  Interpretation
		In this Subdivision:
asset means property, or a right, of any kind, and includes:
	(a)	any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and
	(b)	any chose in action; and
	(c)	any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and
	(d)	any asset within the meaning of Part IIIA;
but does not include trading stock.
liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).
Subdivision 57-F—Superannuation deductions
57-40  Contributions under defined benefit superannuation schemes
	(1)	This section applies to a deduction allowable apart from this Subdivision to the transition taxpayer under section 82AAC for a contribution made to a fund in relation to a person if:
	(a)	the person was an employee of the transition taxpayer at any time before or after the transition time; and
	(b)	the contribution was made under a defined benefit scheme (within the meaning of section 6A of the Superannuation Guarantee (Administration) Act 1992).
Deduction allowable only if sum of all deductions exceeds defined benefit threshold amount
	(2)	The deduction is not allowable for a year of income if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the defined benefit threshold amount (see subsection (4)) for the year of income.
Amount of deduction not allowable
	(3)	If the sum is greater than that amount, so much of the deduction as is worked out using the following formula is not allowable:

Meaning of defined benefit threshold amount
	(4)	The defined benefit threshold amount for a year of income is:
	(a)	if the year of income is the transition year—the unfunded liability amount (see subsection (5)); or
	(b)	in any other case—that amount as reduced by the total amount of deductions to which this section applies, that, because of subsection (2) or (3), have not (disregarding section 57-55) been allowable to the transition taxpayer for all previous years of income.
Meaning of unfunded liability amount
	(5)	The unfunded liability amount is the value, worked out as at the transition time in accordance with actuarial principles, of the liabilities of the transition taxpayer to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer, where the liabilities:
	(a)	had accrued as at the transition time; and
	(b)	were, according to actuarial principles, unfunded at that time; and
	(c)	were liabilities only under defined benefit schemes.
57-45  Deduction for surplus to meet defined benefit scheme liabilities
		If:
	(a)	at the transition time, the transition taxpayer has an amount that, according to the transition taxpayer’s accounts, is available solely to meet liabilities of a kind mentioned in the definition of unfunded liability amount in subsection 57‑40(5); and
	(b)	that amount exceeds the amount of those liabilities;
the excess is an allowable deduction of the transition taxpayer for the transition year.
57-50  Contributions generally
	(1)	This section applies to a deduction allowable apart from this Subdivision to the transition taxpayer under section 82AAC for a contribution made to a fund in relation to a person if the person was an employee of the transition taxpayer at any time before or after the transition time.
Deduction allowable only if sum of all deductions exceeds general superannuation threshold amount
	(2)	The deduction is not allowable for a year of income if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the general superannuation threshold amount (see subsection (4)) for the year of income.
Amount of deduction not allowable
	(3)	If the sum is greater than the general superannuation threshold amount, so much of the deduction as is worked out using the following formula is not allowable:

Meaning of general superannuation threshold amount
	(4)	The general superannuation threshold amount for a year of income is:
	(a)	if the year of income is the transition year—the undischarged superannuation liability amount (see subsection (5)); or
	(b)	in any other case—the amount applicable under paragraph (a), reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not (disregarding section 57-55) been allowable to the transition taxpayer for all previous years of income.
Meaning of undischarged superannuation liability amount
	(5)	This is how to work out the transition taxpayer’s undischarged superannuation liability amount:
Step 1.	For each person who was an employee of the transition taxpayer at any time before the transition time, take the sum of:
	(a)	if the whole or any part of the person’s period of employment with the transition taxpayer took place before the beginning of the superannuation guarantee period (see subsection (6)) and there were one or more required award etc. contribution amounts (see subsection (7)) in respect of any of that whole or part—that amount or those amounts; and
	(b)	if, for the whole or any part or parts of the superannuation guarantee period, there were one or more required award etc. contribution amounts that were greater than the required superannuation guarantee contribution amount or amounts (see subsection (8))—that greater amount or those greater amounts; and
	(c)	if, for the whole or any part or parts of the superannuation guarantee period, either there was no required award etc. contribution amount or there was such an amount but it was not greater than the required superannuation guarantee contribution amount—the required superannuation guarantee contribution amount for the whole or the part of the period, or the sum of the required superannuation guarantee contribution amounts for the parts of the period, as the case may be.
Step 2.	Reduce the sum from Step 1 by the sum of amounts that the transition taxpayer actually contributed:
	(a)	in payment of required award etc. contribution amounts or required superannuation guarantee contribution amounts for the employee that are included in the sum in Step 1; or
	(b)	voluntarily to a superannuation fund for the purpose of providing superannuation benefits for the employee, or dependants of the employee;
	in respect of any period of employment of the employee with the transition taxpayer before the start of the transition year.
Step 3.	If the result after applying Step 2 for a particular employee is less than nil, it is nil instead.
Step 4.	Add up the results for all of the employees. This final sum is the transition taxpayer’s undischarged superannuation liability amount.
Meaning of superannuation guarantee period
	(6)	The superannuation guarantee period is the period beginning at the start of the earliest contribution period (within the meaning of the Superannuation Guarantee (Administration) Act 1992) and ending at the transition time.
Meaning of required award etc. contribution amount
	(7)	A required award etc. contribution amount is an amount required to be contributed to a superannuation fund by an employer for the benefit of an employee:
	(a)	by an industrial award; or
	(b)	by an occupational superannuation arrangement; or
	(c)	by a law of the Commonwealth, a State or a Territory; or
	(d)	otherwise.
Meaning of required superannuation guarantee contribution amount
	(8)	A required superannuation guarantee contribution amount is an amount that an employer would need to contribute in respect of a contribution period (within the meaning of the Superannuation Guarantee (Administration) Act 1992) so as not to have a superannuation guarantee shortfall under that Act in respect of that period.
57-55  Deductions reduced under both sections 57-40 and 57-50
		If the amount of a deduction otherwise allowable to the transition taxpayer in respect of a contribution to a fund is required to be reduced under both sections 57-40 and 57-50:
	(a)	if the reduction is of a different amount—the amount is reduced only under that section that requires the greater reduction; or
	(b)	if the reduction is of the same amount—the amount is reduced only under section 57-40.
Subdivision 57-G—Denial of certain deductions
57-60  Effect of pre-transition time accrued leave entitlements
	(1)	This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under subsection 51(1) in respect of long service leave payments or annual leave payments to a person who was an employee of the transition taxpayer at any time before or after the transition time.
Note:	Subsection 51(3) contains additional requirements.
Deduction allowable only if sum of all deductions exceeds leave threshold amount
	(2)	The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the leave threshold amount (see subsection (4)) for the year of income.
Amount of deduction not allowable
	(3)	If the sum is greater than the leave threshold amount, so much of the deduction as is worked out using the following formula is not allowable:

Meaning of leave threshold amount
	(4)	The leave threshold amount for a year of income is:
	(a)	if the year of income is the transition year—the (pre‑transition time service) leave amount (see subsection (5)) of the transition taxpayer; or
	(b)	in any other case—that amount as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income.
Meaning of (pre-transition time service) leave amount
	(5)	The (pre-transition time service) leave amount of the transition taxpayer is the sum of the following amounts:
	(a)	the amount that would be payable by the transition taxpayer in respect of annual leave and long service leave if, at the transition time, all employees of the transition taxpayer began to take all leave of that kind that they were eligible to take; and
	(b)	if the transition taxpayer elects, in accordance with subsection (6), that this paragraph applies—the amount that, according to actuarial principles, would need to be set aside at the transition time to meet all obligations of the transition taxpayer that might reasonably be expected to arise after that time to make annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) for periods of service of employees occurring before the transition time; and
	(c)	if paragraph (b) does not apply—the present value, at the transition time, of all annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) that the transition taxpayer would become liable to make after that time in respect of periods of service of employees occurring before that time if all such leave became eligible to be taken.
Election
	(6)	The election mentioned in paragraph (5)(b) must be made in writing before:
	(a)	the day by which the transition taxpayer’s return of income for the transition year is due to be lodged; or
	(b)	such later day as the Commissioner allows.
57-65  Treatment of bad debts
	(1)	This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under this Act for the writing off as bad of the whole or part of a debt owing to the transition taxpayer.
Deduction allowable only if sum of all deductions exceeds doubtful debt provision limit
	(2)	The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the doubtful debt provision limit (see subsection (4)) for the year of income.
Amount of deduction not allowable
	(3)	If the sum is greater than that limit, so much of the deduction as is worked out using the following formula is not allowable:

Meaning of doubtful debt provision limit
	(4)	The doubtful debt provision limit for a year of income is:
	(a)	if the year of income is the transition year—the pre‑transition doubtful debt limit (see subsection (5)); or
	(b)	in any other case—that limit as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income.
Meaning of pre-transition doubtful debt limit
	(5)	The pre-transition doubtful debt limit is the total of the amounts that, under generally accepted accounting principles, would be the appropriate doubtful debt provisions in relation to all debts owed to the transition taxpayer as at the transition time.
Reduction of limit for excess recovery
	(6)	If:
	(a)	at the transition time, a debt is owed to the transition taxpayer; and
	(b)	the sum of:
	(i)	the amount (if any) that, under generally accepted accounting principles, would be the appropriate doubtful debt provision in relation to the debt as at the transition time; and
	(ii)	any amounts later recovered in respect of the debt;
		exceeds the amount of the debt;
the pre-transition doubtful debt limit is reduced by the amount of the excess.
57-70  Treatment of eligible termination payments
	(1)	This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under subsection 51(1) or subsection 78(11) for an eligible termination payment for a person who was an employee of the transition taxpayer at any time before the transition time (regardless of whether the person was an employee at or after the transition time).
	(2)	So much (if any) of the deduction as relates to a period of service of the employee before the transition time is not allowable.
	(3)	This section does not apply to an approved early retirement scheme payment or a bona fide redundancy payment.
	(4)	Expressions in this section that are also in subsection 27A(1) have the same meanings as in that subsection.
Subdivision 57-H—Domestic losses
57-75  Domestic losses
		In applying section 79E, 79F, 80, 80AAA or 80AA to the transition taxpayer:
	(a)	only exempt income derived at or after the transition time is taken into account as exempt income of the transition taxpayer; and
	(b)	allowable deductions are only taken into account as non-loss deductions of the transition taxpayer to the extent that they are in respect of:
	(i)	services rendered; or
	(ii)	goods provided; or
	(iii)	the doing of any other thing;
		at or after the transition time.
Subdivision 57-I—Depreciation deductions
57-80  Depreciation
	(1)	This section applies in determining a deduction allowable to the transition taxpayer in respect of any period (the depreciation period) after the transition time for depreciation under Subdivision A of Division 3 of Part III in respect of a unit of property, if the property was owned by the transition taxpayer at the transition time.
Assume that the transition taxpayer had never been exempt
	(2)	Assume that, at all times before the transition time, when the unit of property was owned by:
	(a)	the transition taxpayer; or
	(b)	an associate (see subsection (5));
the transition taxpayer’s income had not been exempt from income tax and no provision of this Act had denied a deduction for depreciation in respect of the unit.
Deemed method of depreciation
	(3)	The transition taxpayer is taken to have used the same method of depreciation in relation to the unit of property in each year before the transition year as it uses for:
	(a)	the transition year; or
	(b)	if the transition taxpayer does not claim depreciation for the transition year—the first year after the transition year in which the transition taxpayer claims depreciation.
Elections under section 54A
	(4)	If, assuming that the income of the transition taxpayer had never been wholly exempt from income tax, the transition taxpayer could have made an election under subsection 54A(1) at a particular time before the transition time, the transition taxpayer is taken to have made the election at that time.
Elections under subsection 59(2A)
	(5)	If, assuming that the income of the transition taxpayer had never been wholly exempt from income tax, the transition taxpayer could have made or could make an election under subsection 59(2A) in relation to the disposal, loss or destruction of a unit of property taking place before the transition time, the transition taxpayer is taken not to have made and not to be able to make that election.
Definitions
	(6)	In this section:
associate has the same meaning as in subsection 26AAB(14).
method of depreciation means the way of working out the depreciation allowable under this Act in respect of a unit of property set out in paragraph 56(1)(a) or (b).
Subdivision 57-J—Capital allowances and certain other deductions
57-85  What are the modified deduction rules?
		For the purposes of this Subdivision, each of the following provisions and groups of provisions is a modified deduction rule:
Modified deduction rules	
Item	Description	Provision	
1	Borrowing expenses	Section 67	
2	Electricity connections	Section 70A	
3	Environmental impact studies	Subdivision C of Division 3 of Part III	
4	Environment protection	Subdivision CA of Division 3 of Part III	
5	Films, Australian	Division 10BA of Part III	
6	Grapevines	Section 75AA	
7	Industrial property	Division 10B of Part III	
8	Land degradation	Section 75D	
9	Gifts	Section 78	
10	Mining and quarrying	Division 10 of Part III	
11	Mining transport and quarrying transport	Division 10AAA of Part III	
12	Petroleum mining	Division 10AA of Part III	
13	Mining etc. site rehabilitation	Division 10AB of Part III	
14	Research and development (“R&D”)	Section 73B	
15	Scientific research	Section 73A	
16	Telephone lines	Section 70	
17	Timber mill buildings	Subdivision B of Division 10A of Part III	
18	Timber operations: access roads	Subdivision A of Division 10A of Part III	
19	Water conservation	Section 75B 	
57-90  Post-transition deductions—assume that the transition taxpayer had never been exempt
		In working out the transition taxpayer’s allowable deductions under a modified deduction rule for the transition year or a later year of income, assume that the modified deduction rule had applied at all times before the transition time as if the transition taxpayer’s income had never been exempt from income tax.
57-95  Amount of deduction not allowable for transition year
	(1)	If, apart from this section, an amount would be an allowable deduction under a modified deduction rule for the transition year in respect of expenditure incurred before the transition time (whether or not during the transition year), only so much of the amount as is worked out using the following formula is so allowable:

where:
post-expenditure part means:
	(a)	if the expenditure was incurred before the transition year—the number of days in the transition year; or
	(b)	otherwise—the number of days in the period from the beginning of the day on which the expenditure is incurred until the end of the transition year.
	(2)	This section does not apply to an amount to which paragraph 57‑110(1)(b) (which deals with balancing adjustments) applies.
57-100  No elections etc. before transition time
		In working out the transition taxpayer’s allowable deductions under a modified deduction rule:
	(a)	assume that the transition taxpayer did not, at any time, make any election or declaration, or give any notice, under the rule in relation to a year of income before the transition year; and
	(b)	any election or declaration (other than one under subsection 124ZADA(1)) the transition taxpayer makes, or any notice the transition taxpayer gives, under the rule in relation to the transition year has no effect in so far as it relates to expenditure incurred before the transition time.
57-105  Special rules for mining and quarrying
Exploration and prospecting—assume no expenditure
	(1)	In working out the transition taxpayer’s allowable deductions under Division 10 or 10AA of Part III, assume that the transition taxpayer incurred no expenditure on exploration and prospecting before the transition time.
Assume that no excess deductions available
	(2)	In working out the transition taxpayer’s allowable deductions under Division 10 or 10AA of Part III, assume that, for each year of income before the transition year, the transition taxpayer’s assessable income would have exceeded the total of the transition taxpayer’s deductions for the year.
Note:	This means that the transition taxpayer can have no excess deductions remaining from years of income before the transition year.
Subdivision 57-K—Balancing adjustments
57-110  Apportionment of balancing adjustments
	(1)	If, apart from this subsection, a balancing adjustment provision (see subsection (2)) would:
	(a)	require an amount to be included in the transition taxpayer’s assessable income for the transition year or a later year of income in respect of particular expenditure; or
	(b)	allow an amount as a deduction from the transition taxpayer’s assessable income for the transition year or a later year of income in respect of particular expenditure;
then only so much of the amount as is worked out using the following formula is so included or allowable:

where:
actual deductions is the sum of all deductions actually allowed or allowable to the transition taxpayer for the expenditure under the deduction rule to which the balancing adjustment provision relates (see subsection (3)).
notional deductions is the sum of all deductions for the expenditure that would have been allowable to the transition taxpayer under the deduction rule to which the balancing adjustment provision relates, if the transition taxpayer had never been wholly exempt from income tax.
	(2)	For the purposes of subsection (1), the following are the balancing adjustment provisions:
Balancing adjustment provisions	
Item	Description	Provision	
1	Capital works: buildings, structural improvements, environment protection earthworks and extensions, alterations or improvements	Sections 124ZE and 124ZK	
2	Depreciation	Section 59	
3	Grapevines	Subsection 75AA(6)	
4	Industrial property	Sections 124N and 124P	
5	Mining and quarrying	Section 122K	
6	Mining transport and quarrying transport	Section 123C	
7	Petroleum mining	Section 124AM	
8	Research and development (“R&D”)	Subsections 73B(23), (24), (25), (26) and (27)	
9	Scientific research	Subsection 73A(4)	
10	Timber mill buildings	Section 124JB	
11	Timber operations: access roads	Section 124G	
	(3)	For the purposes of subsection (1), the following are the deduction rules in relation to the respective balancing adjustment provisions:
	(a)	if the balancing adjustment provision is section 59—Subdivision A of Division 3;
	(b)	if the balancing adjustment provision is section 124ZE—Division 10C;
	(c)	if the balancing adjustment provision is section 124ZK—Division 10D;
	(d)	in any other case—the modified deduction rule (see section 57-85) that the balancing adjustment provision is part of.
Subdivision 57-L—Trading stock
57-115  Modification of trading stock provisions
	(1)	For the purposes of applying Subdivision B of Division 2 of Part III in relation to the transition year, the only trading stock of the transition taxpayer that is to be taken into account under section 28 as being on hand at the beginning of the transition year is such trading stock as was on hand at the transition time.
	(2)	For the purpose of working out the value at which the trading stock is to be taken into account, the year of income preceding the transition year is taken to have ended immediately before the transition time.
Note:	The value of trading stock on hand at the beginning of the transition year will, under section 29, be the same as at the end of the preceding year of income.
	(3)	If:
	(a)	 the basis of valuation of the trading stock at the end of the transition year is cost price; and
	(b)	 the basis of valuation at the beginning of the transition year is different;
then, for the purposes of the valuation at the end of the transition year, the cost price of the trading stock is taken to be equal to the value at which it was taken into account at the beginning of the transition year.
2  Application
The amendments made by this Schedule apply where the transition time is after 2 July 1995.

Schedule 3—Amendment of the Development Allowance Authority Act 1992
1  Subsection 93D(1) (paragraph (e) of the definition of Crown lease)
Omit “(within the meaning of section 160K of that Act)”.
2  Subsection 93D(1)
Insert:
non-exempt resident company means an incorporated body (not in the capacity of trustee), where:
	(a)	the body is a resident; and
	(b)	the body’s income is not exempt from income tax under the Tax Act because of a relevant exempting provision.
3  Subsection 93D(1)
Insert:
non-exempt resident corporate limited partnership, in relation to a year of income, means a corporate limited partnership (not in the capacity of trustee) in relation to the year of income, where:
	(a)	the partnership is a resident; and
	(b)	the partnership’s income is not exempt from income tax under the Tax Act because of a relevant exempting provision.
4  Subsection 93D(1)
Insert:
relevant exempting provision has the same meaning as in section 160K of the Tax Act.
5  Subsection 93D(1)
Insert:
resident has the same meaning as in the Tax Act.
6  After subsection 93I(4)
Insert:
	(4A)	In the case of:
	(a)	an indirect infrastructure borrowing; or 
	(b)	a refinancing infrastructure borrowing that relates to an indirect infrastructure borrowing;
the borrower must be:
	(c)	a non‑exempt resident company at the time of the borrowing; or 
	(d)	a non‑exempt resident corporate limited partnership in relation to the year of income in which the borrowing takes place.
	(4B)	If the borrower is an incorporated company (not in the capacity of trustee) and the borrowing is:
	(a)	an indirect infrastructure borrowing that relates to a direct infrastructure borrowing; or
	(b)	a refinancing infrastructure borrowing that relates to an indirect infrastructure borrowing covered by paragraph (a);
the borrower must, at the time of the borrowing, intend to be a non‑exempt resident company throughout the applicable borrower requirement period. For this purpose, the applicable borrower requirement period is the borrower requirement period in relation to the direct infrastructure borrowing.
	(4C)	If the borrower is a corporate limited partnership (not in the capacity of trustee) in relation to the year of income in which the borrowing takes place and the borrowing is:
	(a)	an indirect infrastructure borrowing that relates to a direct infrastructure borrowing; or
	(b)	a refinancing infrastructure borrowing that relates to an indirect infrastructure borrowing covered by paragraph (a);
the borrower must, at the time of the borrowing, intend to be a non‑exempt resident corporate limited partnership in relation to each year of income in which any part of the applicable borrower requirement period occurs. For this purpose, the applicable borrower requirement period is the borrower requirement period in relation to the direct infrastructure borrowing.
7  After section 93ZA
Insert:
93ZAA  Cancellation of certificate that applies to an indirect infrastructure borrowing etc.—holder ceases to be a resident
	(1)	If:
	(a)	a certificate held by an incorporated company (not in the capacity of trustee) applies to:
	(i)	an indirect infrastructure borrowing that relates to a direct infrastructure borrowing; or
	(ii)	a refinancing infrastructure borrowing that relates to an indirect infrastructure borrowing covered by subparagraph (i); and
	(b)	at the time when the company became the holder of the certificate, the holder was a non-exempt resident company; and
	(c)	the holder has ceased to be a non-exempt resident company before the end of the applicable borrower requirement period;
the DAA is taken to have cancelled the certificate with effect from the time of the cessation. For this purpose, the applicable borrower requirement period is the borrower requirement period in relation to the direct infrastructure borrowing.
	(2)	If:
	(a)	a certificate held by a partnership (not in the capacity of trustee) applies to:
	(i)	an indirect infrastructure borrowing that relates to a direct infrastructure borrowing; or
	(ii)	a refinancing infrastructure borrowing that relates to an indirect infrastructure borrowing covered by subparagraph (i); and
	(b)	the holder was a non-exempt resident corporate limited partnership in relation to the year of income in which the partnership became the holder of the certificate; and
	(c)	the holder has ceased to be a non‑exempt resident corporate limited partnership in relation to a year of income in which any part of the applicable borrower requirement period occurs;
the DAA is taken to have cancelled the certificate with effect from the time of the cessation. For this purpose, the applicable borrower requirement period is the borrower requirement period in relation to the direct infrastructure borrowing.
	(3)	If a certificate is cancelled under subsection (1) or (2), the cessation is taken to be the ground relied on by the DAA for cancelling the certificate.
93ZAB  Cancellation of certificate that applies to an indirect infrastructure borrowing—transfer of rights etc.
	(1)	If:
	(a)	a certificate applies to an indirect infrastructure borrowing; and
	(b)	the holder transfers to another person (the transferee) any or all of the holder’s rights, interests and obligations in relation to the lending of the borrowed money as mentioned in subparagraph 93G(b)(i); and
	(c)	30 days pass and:
	(i)	in a case where all of the holder’s rights, interests and obligations are transferred—the holder has neither repaid the whole of the borrowing nor passed the certificate transfer test set out in subsection (3); or
	(ii)	in a case where some, but not all, of the holder’s rights, interests and obligations are transferred—the holder has not repaid the whole of the borrowing;
the DAA is taken to have cancelled the certificate with effect from the time of the transfer.
	(2)	If the certificate is cancelled under subsection (1), the transfer is taken to be the ground relied on by the DAA for cancelling the certificate.
	(3)	For the purposes of this section, the holder passes the certificate transfer test at a particular time if, before that time:
	(a)	an application has been made under section 93U to transfer the certificate to the transferee; and
	(b)	either:
	(i)	the DAA has transferred the certificate to the transferee under this Division; or
	(ii)	the DAA was required to transfer the certificate to the transferee under this Division.
93ZAC  Cancellation of certificate that applies to an indirect infrastructure borrowing—total repayment of related direct infrastructure borrowing
	(1)	If:
	(a)	a certificate applies to an indirect infrastructure borrowing that relates to a direct infrastructure borrowing; and
	(b)	the whole of the direct infrastructure borrowing is repaid; and
	(c)	30 days pass and:
	(i)	in a case where the repayment is made using a refinancing infrastructure borrowing—the holder has neither repaid the whole of the indirect infrastructure borrowing nor passed the certificate transfer test set out in subsection (3); or
	(ii)	in any other case—the holder has not repaid the whole of the indirect infrastructure borrowing;
the DAA is taken to have cancelled the certificate with effect from the time of the repayment of the direct infrastructure borrowing.
	(2)	If the certificate is cancelled under subsection (1), the repayment of the direct infrastructure borrowing is taken to be the ground relied on by the DAA for cancelling the certificate.
	(3)	For the purposes of this section, the holder passes the certificate transfer test at a particular time if, before that time:
	(a)	an application has been made under section 93U to transfer the certificate to the borrower in relation to the refinancing infrastructure borrowing (the transferee); and
	(b)	either:
	(i)	the DAA has transferred the certificate to the transferee under this Division; or
	(ii)	the DAA was required to transfer the certificate to the transferee under this Division.
93ZAD  Cancellation of certificate that applies to an indirect infrastructure borrowing—partial repayment of related direct infrastructure borrowing
	(1)	If:
	(a)	a certificate applies to an indirect infrastructure borrowing that relates to a direct infrastructure borrowing; and
	(b)	a percentage (being a percentage less than 100%) of the direct infrastructure borrowing is repaid; and
	(c)	30 days pass and the holder has not repaid that percentage of the indirect infrastructure borrowing;
the DAA is taken to have cancelled the certificate with effect from the time of the repayment of that percentage of the direct infrastructure borrowing.
	(2)	If the certificate is cancelled under subsection (1), the repayment of that percentage of the direct infrastructure borrowing is taken to be the ground relied on by the DAA for cancelling the certificate.
8  Subsection 93ZB(3)
Omit “must also cancel”, substitute “is taken to have also cancelled”.
9  At the end of subsection 93ZB(3)
Add:
The grounds relied on by the DAA for cancelling the certificate that applies to the refinancing infrastructure borrowing are taken to be the same as the grounds relied on by the DAA for cancelling the certificate that applies to the indirect infrastructure borrowing.
10  Application of amendments 
(1)	Subsections 93I(4A), (4B) and (4C) and section 93ZAA of the Development Allowance Authority Act 1992 as amended by this Schedule apply to an indirect infrastructure borrowing or a refinancing infrastructure borrowing, where a certificate in respect of the borrowing was issued on or after 30 October 1995.
(2)	Sections 93ZAB, 93ZAC and 93ZAD of the Development Allowance Authority Act 1992 as amended by this Schedule apply to an indirect infrastructure borrowing, where a certificate in respect of the borrowing was issued on or after 30 October 1995.

Schedule 4—Research and development activities
Part 1—Amendment of the Income Tax Assessment Act 1936
Division 1—Amendments to reduce the rate of deduction from 150% to 125%
1  Subsection 73B(1) (paragraph (ba) of the definition of aggregate research and development amount)
Omit “two-thirds”, substitute “four-fifths”.
2  Subsection 73B(4E)
Omit “1.5”, substitute “1.25”.
3  Subsection 73B(13)
Omit “1.5”, substitute “1.25”.
4  Subsection 73B(14)
Omit “1.5”, substitute “1.25”.
5  Paragraph 73B(15)(a)
Omit “1.5”, substitute “1.25”.
6  Subsection 73B(15AB)
Omit “1.5”, substitute “1.25”.
7  Subparagraph 73B(23)(e)(i)
Omit “1.5”, substitute “1.25”.
8  Subsection 73C(8)
Omit “1.5”, substitute “1.25”.
9  Subsection 73C(9)
Omit “1.5”, substitute “1.25”.
10  Application
The amendments made by this Division apply to expenditure incurred after 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 except expenditure that was required to be incurred by a contract (other than a contract of service) entered into before that time.
Division 2—Amendments relating to deductions for expenditure incurred by partnerships
11  Subsection 73B(1)
Insert:
partnership means:
	(a)	eligible companies jointly registered under section 39P of the Industry Research and Development Act 1986; or
	(b)	a Co-operative Research Centre designated under the program known as the Co-Operative Research Centres Program.
12  After subsection 73B(33B)
Insert:
	(33BA)	Subject to subsections (33BB) and (33C), if the Board gives the Commissioner a certificate in relation to a company or companies under subsection 39PB(6) of the Industry Research and Development Act 1996, a deduction is not allowable under this section in respect of expenditure in relation to research and development activities referred to in the certificate that is incurred by that company or any of those companies after the day stated in the certificate.
	(33BB)	Subsection (33BA) does not apply to expenditure in relation to research and development activities in respect of which a company is registered under section 39J of the Industry Research and Development Act 1986.
13  Subsection 73B(33C)
Omit “or (33B)”, substitute “, (33B) or (33BA)”.
14  Application
The amendments made by this Division are taken to have come into effect at 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996.
Division 3—Amendments to limit the period for amending assessments to give effect to provisions relating to deductions for expenditure on research and development activities
15  Subsection 170(10)
Omit “or 73B, sections 73C, 73CB and 73D”.
16  After subsection 170(10)
Insert:
	(10A)	Nothing in this section prevents the amendment, at any time, of an assessment to increase the liability of a taxpayer for the purpose of giving effect to section 73B, 73C, 73CB or 73D.
17  Application
The amendments made by this Division apply to the amendment of assessments after 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996 other than an amendment resulting from an application by the taxpayer:
	(a)	that was made before that time; and
	(b)	in respect of which the taxpayer gave the Commissioner before that time all the information needed by the Commissioner for the purpose of deciding the application.
Division 4—Amendments relating to deductions for interest payments
18  Subsection 73B(1) (after paragraph (d) of the definition of aggregate research and development amount)
Insert:
	and (e)	interest expenditure; 
19  Subsection 73B(1)
Insert:
interest expenditure, in relation to an eligible company in relation to a year of income, means interest, or an amount in the nature of interest, incurred by the company during the year of income in the financing of research and development activities.
20  Subsection 73B(1) (definition of research and development expenditure)
After “core technology expenditure”, insert “, interest expenditure”.
21  After subsection 73B(14)
Insert:
	(14A)	Subject to this section, if an eligible company incurs interest expenditure during a year of income, the amount of that expenditure is allowable as a deduction from the company’s assessable income of the year of income.
22  Application
The amendments made by this Division apply to interest expenditure incurred after 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996 other than expenditure incurred under a fixed‑term contract entered into before that time.
Division 5—Amendments relating to feedstock expenditure
23  Subsection 73B(1)
Insert:
eligible feedstock expenditure has the meaning given by subsection (1A).
24  Subsection 73B(1)
Insert:
feedstock expenditure, in relation to an eligible company, means expenditure incurred by the company in acquiring or producing materials or goods to be the subject of processing or transformation by the company in research and development activities, and includes expenditure incurred by the company on any energy input directly into the processing or transformation.
25  Subsection 73B(1)
Insert:
feedstock input, in relation to an eligible company in relation to a year of income, means the company’s feedstock expenditure in respect of materials or goods that were the subject of processing or transformation by the company in research and development activities during the year of income.
26  Subsection 73B(1)
Insert:
feedstock output, in relation to an eligible company in relation to a year of income, means the sum of the amounts worked out under paragraphs (a) and (b) in relation to any products that were obtained by the company during the year of income from the processing or transformation of materials or goods the acquisition or production of which was feedstock expenditure of the company:
	(a)	if any of those products were sold by the company during the year of income by a transaction or transactions entered into at arm’s length with the buyer or buyers—the amount or amounts received or receivable by the company from the sale or sales; 
	(b)	if any of those products were not sold by the company during the year of income or were sold by the company otherwise than by a transaction or transactions entered into at arm’s length with the buyer or buyers—the amount or amounts (if any) that would have been received by the company by selling those products at the end of the year of income by a transaction or transactions entered into at arm’s length with the buyer or buyers.
27  Subsection 73B(1) (definition of research and development expenditure)
Before “or expenditure incurred in the acquisition or construction of plant”, insert “, feedstock expenditure”.
28  Subsection 73B(1) (at the end (but not as part of paragraph (c)) of the definition of research and development expenditure)
Add “and includes any eligible feedstock expenditure that the company has in respect of the year of income in respect of related research and development activities”.
29  Subsection 73B(1)
Insert:
residual feedstock expenditure, in relation to an eligible company in relation to a year of income, means the lesser of:
	(a)	the company’s feedstock input in respect of the year of income; or
	(b)	the company’s feedstock output in respect of the year of income.
30  After subsection 73B(1)
Insert:
	(1A)	For the purposes of this section, an eligible company has eligible feedstock expenditure in respect of a year of income in relation to related research and development activities if the company’s feedstock input in respect of the year of income in relation to those activities exceeded the company’s feedstock output in respect of the year of income in relation to those activities, and the amount of the excess constitutes the company’s eligible feedstock expenditure in respect of the year of income in relation to those activities.
31  Before subsection 73B(15)
Insert:
	(14B)	Subject to this section, if an eligible company has any residual feedstock expenditure in respect of a year of income, the amount of that expenditure is allowable as a deduction from the company’s assessable income of the year of income.
32  Application
The amendments made by this Division apply to expenditure incurred under a contract entered into after 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996.
Division 6—Amendments relating to core technology expenditure
33  Subsection 73B(1) (at the end of paragraphs (a) and (b) of the definition of aggregate research and development amount)
Add “and”.
34  Subsection 73B(1) (paragraph (aa) of the definition of aggregate research and development amount)
Repeal the paragraph, substitute:
	(aa)	the deductions allowed for core technology expenditure under subsections (12) and (12A) in the company’s assessment in respect of income of the year of income; and
35  Subsection 73B(1)
Insert:
core technology adjustment amount, in relation to an eligible company in relation to a year of income in which the company disposed of particular core technology, means the total amount of core technology expenditure incurred by the company before or during the year of income in respect of that core technology, reduced by the sum of the deductions that have been allowed to the company under subsection (12A) in previous years of income in relation to that expenditure.
36  Subsection 73B(12)
After “during a year of income”, insert “under a contract entered into before 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996”.
37  After subsection 73B(12)
Insert:
	(12A)	Subject to this section, if:
	(a)	an eligible company has, before or during the year of income, incurred core technology expenditure in respect of particular core technology (the relevant core technology) under a contract entered into at or after the time referred to in subsection (12); and
	(b)	during the year of income the company incurs research and development expenditure that is related to the relevant core technology;
there is allowable as a deduction from the company’s assessable income of the year of income so much of the amount worked out using the formula in subsection (12B) in respect of that core technology expenditure as does not exceed one‑third of the amount of that related research and development expenditure.
	(12B)	The formula for the purposes of subsection (12A) is:

where:
undeducted past expenditure means so much of the core technology expenditure incurred by the company during previous years of income in relation to the relevant core technology under contracts entered into at or after the time referred to in subsection (12) as has not been allowed as a deduction from the company’s assessable income of any of those previous years of income.
current year core technology adjustment amount, in relation to a company in relation to a year of income in which:
	(a)	an amount or amounts are included in the company’s assessable income under subsection (27A) because the company received or was entitled to receive an amount or amounts from the disposal of the relevant core technology; or
	(b)	an amount or amounts would be so included apart from the operation of paragraph 73B(27)(c);
means:
	(c)	the core technology adjustment amount in relation to the company in relation to that year of income in respect of the relevant core technology; or
	(d)	the amount or the sum of the amounts referred to in paragraph (b);
whichever is the less.
	(12C)	A deduction in respect of core technology expenditure is not allowable from a taxpayer’s assessable income of any year of income under any provision of this Act other than this section.
38  At the end of paragraphs 73B(27B)(b) and (c)
Add “and”.
39  After paragraph 73B(27B)(c)
Insert:
	(d)	the company receiving or being entitled to receive an amount from the disposal of core technology;
40  Subsection 73B(27C)
Omit “or (c)”, substitute “, (c) or (d)”.
41  At the end of subsection 73B(27C)
Add:
	; or (c)	if paragraph 27B(d) applies—only so much (if any) of the amount referred to in that paragraph as exceeds the core technology adjustment amount in relation to the core technology concerned.
42  Application
The amendments made by this Division do not apply to core technology expenditure incurred by a partnership.
Division 7—Amendments relating to pilot plant
43  Subsection 73B(1) (after paragraph (b) of the definition of aggregate research and development amount)
Insert:
	(ba)	two-thirds of the deductible amount, or of the sum of the deductible amounts, of qualifying expenditure in relation to the company in respect of a unit or units of post‑23 July 1996 pilot plant in relation to the year of income; and
44  Subsection 73B(1) (at the end of paragraph (c) of the definition of plant)
Add “other than post‑23 July 1996 pilot plant”.
45  Subsection 73B(1) (paragraph (a) of the definition of plant expenditure)
After “plant”, insert “other than post-23 July 1996 pilot plant”.
46  Subsection 73B(1) (paragraph (b) of the definition of plant expenditure)
After “plant”, insert “other than post-23 July 1996 pilot plant”.
47  Subsection 73B(1)
Insert:
post-23 July 1996 pilot plant means pilot plant referred to in subsection (4C).
48  Subsection 73B(1) (definition of research and development expenditure)
After “plant”, insert “or pilot plant”.
49  Subsection 73B(1) (definition of written-down value)
Repeal the definition, substitute:
written-down value has the meaning given by subsections (4A) and (4B).
50  After subsection 73B(4)
Insert:
	(4A)	The written-down value of a unit of plant other than post-23 July 1996 pilot plant:
	(a)	that is owned by a company; and
	(b)	in relation to which a deduction has been allowed under this section from the company’s assessable income;
is the amount worked out using the formula:

where:
cost means the cost of the unit.
number of deductible years means the number of years of income in respect of which a deduction has been allowed from the company’s assessable income under this section in relation to the unit.
	(4B)	The written-down value of a unit of post-23 July 1996 pilot plant:
	(a)	that is owned by a company; and
	(b)	in relation to which a deduction has been allowed under this section from the company’s assessable income;
is the amount worked out using the formula:

where:
qualifying expenditure means the amount of the qualifying pilot plant expenditure in relation to the company in respect of the unit.
notional deductions means the total amount of the deductions (if any) that would have been allowed or allowable under this section from the company’s assessable income of any year of income in respect of the unit if, in calculating the amount of any such deduction, any provision for an amount to be multiplied by a number greater than one had not been included.
	(4C)	If:
	(a)	an eligible company incurs expenditure in the acquisition, or the construction, under a contract entered into after 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996, of a unit of pilot plant; and
	(b)	the unit of pilot plant was acquired or constructed for use by the company exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities;
the expenditure is qualifying pilot plant expenditure in relation to the company in respect of the unit of pilot plant.
	(4D)	If the amount that, apart from paragraph (ba) of the definition of aggregate research and development amount in subsection 73B(1), would be the aggregate research and development amount in relation to an eligible company in relation to a year of income does not exceed $20,000, the deductible amount of qualifying expenditure in relation to the company in respect of a unit of post‑23 July 1996 pilot plant in respect of the year of income is the annual deduction percentage of the qualifying pilot plant expenditure in relation to the company in respect of the unit of pilot plant.
	(4E)	If the amount that, apart from paragraph (ba) of the definition of aggregate research and development amount in subsection 73B(1), would be the aggregate research and development amount in relation to an eligible company in relation to a year of income exceeds $20,000, the deductible amount of qualifying expenditure in relation to the company in respect of a unit of post-23 July 1996 pilot plant in respect of the year of income is the annual deduction percentage of the qualifying pilot plant expenditure in relation to the company in respect of the unit of pilot plant, multiplied by 1.5.
	(4F)	The annual deduction percentage for a unit of post-23 July 1996 pilot plant is worked out in relation to a company under subsection (4G) or (4H), as the case requires.
	(4G)	If:
	(a)	the qualifying pilot plant expenditure in relation to an eligible company in respect of a unit of post‑23 July 1996 pilot plant does not exceed $300 or such higher amount as is prescribed; or 
	(b)	the useful life of the unit of post‑23 July 1996 pilot plant is less than 3 years; 
the annual deduction percentage for the unit is 100%.
	(4H)	If subsection (4G) does not apply in respect of a unit of post‑23 July 1996 pilot plant, the annual deduction percentage for the unit is two‑thirds of the percentage worked out using the following table:
Table of percentages	
Item	Years in useful life	Annual deduction percentage	
1	3 to fewer than 5	60%	
2	5 to fewer than 62/3	40%	
3	62/3 to fewer than 10	30%	
4	10 to fewer than 13	25%	
5	13 to fewer than 30	20%	
6	30 or more	10%	
	(4J)	The useful life of a unit of post-23 July 1996 pilot plant owned by an eligible company (the relevant unit) is the period that would be the effective life of the relevant unit under section 54A if:
	(a)	depreciation were allowable under this Act in respect of the relevant unit; and 
	(b)	any reference in that section to the use of a unit of property for assessable income‑producing purposes included, in respect of the relevant unit, a reference to the use by the eligible company of the relevant unit exclusively for the purpose of the carrying on by or on behalf of the eligible company of research and development activities.
51  After subsection 73B(15)
Insert:
	(15AA)	Subject to this section, if in a year of income an eligible company uses a unit of post-23 July 1996 pilot plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, the deductible amount of qualifying expenditure in relation to the company in respect of the unit is an allowable deduction from the company’s assessable income of the year of income.
	(15AB)	The sum of the deductions that, apart from this subsection, would be allowable to a company under subsection (15AA) in respect of a unit of post-23 July 1996 pilot plant must not exceed the qualifying pilot plant expenditure in relation to the company in respect of the unit multiplied by 1.5.
52  Subsection 73B(20)
After “(21),”, insert “(21A),”.
53  Subsection 73B(21)
After “plant” (first occurring), insert “(other than post-23 July 1996 pilot plant)”.
54  After subsection 73B(21)
Insert:
	(21A)	Subsection (20) does not prevent a deduction for depreciation being allowed to an eligible company in respect of a unit of post‑23 July 1996 pilot plant if the company has ceased to use the unit of plant exclusively for the purpose of the carrying on by or on behalf of the company of research and development activities, and if, because of a later use of the unit for another purpose, such a deduction becomes allowable, the unit is taken to have been acquired by the company:
	(a)	at a cost equal to the written‑down value of the unit; and
	(b)	on the day on which the unit was first used by the company for the other purpose.
55  Subsection 73C(9)
Omit “subsection 73B(14)”, substitute “subsections 73B(4E) and (14)”.
56  Application
The amendment made by item 55 is taken to have come into effect at 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996.
Division 8—Amendments to clarify the meaning of research and development activities
57  Subsection 73B(1) (paragraph (a) of the definition of research and development activities)
Omit “systematic, investigative or experimental activities that involve innovation or technical risk”, substitute “systematic, investigative and experimental activities that involve innovation or high levels of technical risk”.
58  Subsection 73B(2)
Repeal the subsection.
59  Subsection 73B(2A)
Omit “investigative or experimental”, substitute “investigative and experimental”.
60  After subsection 73B(2A)
Insert:
	(2B)	For the purposes of the definition of research and development activities in subsection (1):
	(a)	activities are not taken to involve innovation unless they involve an appreciable element of novelty; and
	(b)	activities are not taken to involve high levels of technical risk unless:
	(i)	the probability of obtaining the technical or scientific outcome of the activities cannot be known or determined in advance on the basis of current knowledge or experience; and
	(ii)	the uncertainty of obtaining the outcome can be removed only through a program of systematic, investigative and experimental activities in which scientific method has been applied, in a systematic progression of work (based on principles of physical, biological, chemical, medical, engineering or computer sciences) from hypothesis to experiment, observation and evaluation, followed by logical conclusions.
	(2C)	For the purposes of this section, the following activities are taken not to be systematic, investigative and experimental activities:
	(a)	market research, market testing or market development, or sales promotion (including consumer surveys);
	(b)	quality control;
	(c)	prospecting, exploring or drilling for minerals, petroleum or natural gas for the purpose of discovering deposits, determining more precisely the location of deposits or determining the size or quality of deposits;
	(d)	the making of cosmetic modifications or stylistic changes to products, processes or production methods;
	(e)	management studies or efficiency surveys;
	(f)	research in social sciences, arts or humanities;
	(g)	the making of donations;
	(h)	pre‑production activities such as demonstration of commercial viability, tooling‑up and trial runs;
	(i)	routine collection of information, except as part of the research and development process;
	(j)	preparation for teaching;
	(k)	commercial, legal and administrative aspects of patenting, licensing or other activities;
	(l)	activities associated with complying with statutory requirements or standards, such as the maintenance of national standards, the calibration of secondary standards and routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things;
	(m)	specialised routine medical care;
	(n)	any activity related to the reproduction of a commercial product or process by a physical examination of an existing system or from plans, blueprints, detailed specifications or publically available information.
61  Application
The amendments made by this Division are taken to have come into effect at 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996.

Part 2—Amendment of the Industry Research and Development Act 1986
62  Subsection 4(1) (at the end of paragraphs (a) and (b) of the definition of agreement under this Act)
Add “or”.
63  Subsection 4(1) (at the end of the definition of agreement under this Act)
Add:
	or (e)	an agreement entered into by the Board in connection with the performance of any function of the Board specified in directions given to the Board under subsection 19(1).
64  Subsection 4(1) (at the end of paragraphs (a) and (b) of the definition of application)
Add “or”.
65  Subsection 4(1) (at the end of the definition of application)
Add:
	or (e)	an application made to the Board in connection with the performance of any function of the Board specified in directions given to the Board under subsection 19(1).
66  Subsection 4(1) (at the end of paragraphs (a) and (b) of the definition of subsidy)
Add “or”.
67  Subsection 4(1) (at the end of the definition of subsidy)
Add:
	; or (e)	a payment by way of grant or loan made by the Commonwealth pursuant to an authorisation by the Board in the performance of any function specified in directions given to the Board under subsection 19(1).
68  Subsection 20(1)
Omit “(including, but without limiting the generality of the foregoing, the policies and practices to be followed by the Board with respect to the entering into by the Board of discretionary grant agreements, generic technology agreements, national interest agreements or national procurement development program agreements and the provisions to be included in such agreements)”.
Note:	The heading to section 20 is altered by omitting “Guidelines” and substituting “Directions”.
69  After section 20
Insert:
20A  Minister may give advice to Board or committee
	(1)	The Minister may give advice to the Board, or to a committee, on any matter that relates, directly or indirectly, to the performance of any of the Board’s functions.
	(2)	The advice is to be in writing, delivered to the Chairperson of the Board or of the committee, as the case may be, and is to be expressed to be given under this section.
	(3)	The advice must not relate to a particular person.
	(4)	The Board or committee must consider the advice at its first meeting after the advice is received, but the Board or committee is not required to act in accordance with the advice.
70  After subsection 34A(1)
Insert:
	(1A)	The Board must not enter into an agreement under subsection (1) after the commencement of this subsection.
71  Before subsection 39P(1)
Insert:
	(1A)	This section has effect subject to section 39PA.
72  After section 39P
Insert:
39PA  Limitation of Board’s power to register companies jointly
	(1)	Subject to this section, the Board must not, after the commencement of this section, register eligible companies jointly.
	(2)	If, before 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996 (the commencement time) a favourable advance approval opinion was given in respect of 2 or more eligible companies in relation to a proposed project comprising or including research and development activities, subsection (1) does not prohibit the Board, upon an application made under subsection 39P(1) not later than the end of 12 months after that time, from registering the companies jointly in relation to the project in respect of the year of income or years of income specified in the application.
	(3)	If, before the commencement time, the Board refused under section 39P to register 2 or more eligible companies jointly in relation to a proposed project in respect of a year of income or years of income:
	(a)	where the Administrative Appeals Tribunal decided, on a review of a decision of the Board confirming the refusal, that the companies should be registered jointly in relation to the proposed project in respect of the year of income or one of the years of income but the registration to give effect to the decision had not been effected before that time—subsection (1) does not prohibit the companies from being registered jointly to give effect to the Tribunal’s decision; and
	(b)	subsection (1) does not:
	(i)	prohibit the Board after that time from reconsidering its decision under section 39S or prohibit the Administrative Appeals Tribunal after that time from reviewing a decision of the Board confirming the refusal; and
	(ii)	where the Board on the reconsideration, or the Tribunal on the review, decides that the companies should be registered jointly in relation to the proposed project in respect of the year of income or one or more of the years of income—prohibit the companies from being so registered jointly.
	(4)	In this section:
favourable advance approval opinion, in relation to 2 or more eligible companies in respect of a proposed project, means an informal written opinion given by the Board, otherwise than in connection with a decision by the Board under the finance scheme guidelines, that:
	(a)	the proposed project would comprise or include research and development activities; and
	(b)	a proposed finance scheme in relation to those activities would not be taken to be an ineligible finance scheme for the purposes of this Part.
73  Transitional
(1)	Subject to subitem (2), if, at or after 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996 and before the commencement of section 39PA of the Industry Research and Development Act 1986, the Industry Research and Development Board registered companies jointly, the registration is taken not to have been effected.
(2)	Subitem (1) does not apply to a registration if the Board would not, because of subsection 39PA(2) or (3) of the Industry Research and Development Act 1986, be prohibited from effecting the registration after the commencement of section 39PA of that Act.
74  Before section 39Q
Insert:
39PB  Extension of joint registration to complete project
	(1)	If 2 or more companies are registered jointly in relation to a project in respect of a year of income or years of income, a person may, before the end of that year of income or of the later or latest of those years of income, as the case may be, and not later than 30 June 2000, apply to the Board on behalf of the companies for an extension of the registration to include a later year of income or later years of income in which the companies propose to incur research and development expenditure or interest expenditure in respect of research and development activities comprised or included in the project.
	(2)	The application must:
	(a)	be in writing in accordance with a form approved by the Board; and
	(b)	contain such particulars of the extension as are necessary to enable the Board to make a decision.
	(3)	Subject to subsection (4), if the Board is satisfied that an extension of the registration is necessary to enable the companies to complete the project, the Board may grant the extension for a year of income or years of income not later than the 2004-05 year of income.
	(4)	The Board must not grant the extension unless the Board is satisfied that, if the extension were granted:
	(a)	the companies would not incur expenditure in relation to research and development activities other than those comprised or included in the particulars of the project as stated in the application for the registration under subsection 39P(2); and
	(b)	the companies would not incur any core technology expenditure in relation to research and development activities other than core technology expenditure identified in the application for registration under subsection 39P(2); and
	(c)	the companies would exploit any results of the research and development activities as mentioned in paragraph 39P(3)(f); and
	(d)	the total amount of the expenditure expected to be incurred by the companies in respect of the research and development activities comprised or included in the project in the years of income in respect of which the companies would be jointly registered (including the year of income or years of income covered by the extension) would not exceed the total amount of the expenditure that was expected to be incurred by the companies in respect of those activities as specified in the application for the registration in accordance with paragraph 39P(2)(c).
	(5)	If the Board refuses to grant the extension, the Board must give written notice to the companies stating the reasons for the refusal.
	(6)	If, after granting the extension, the Board becomes of the opinion that:
	(a)	the companies have incurred expenditure in relation to research and development activities other than those comprised or included in the particulars of the project as stated in the application for the registration under subsection 39P(2); or
	(b)	the companies have incurred core technology expenditure in relation to research and development activities other than core technology expenditure identified in the application for registration under subsection 39P(2); or
	(c)	the total amount of the expenditure incurred by the companies in respect of the research and development activities comprised or included in the project in the years of income in respect of which the companies are jointly registered (the actual expenditure in relation to research and development activities) has exceeded the total amount of the expenditure that was expected to be incurred by the companies in respect of those activities as specified in the application for the registration in accordance with paragraph 39P(2)(c) (the expected expenditure in relation to research and development activities);
the Board must give the Commissioner a certificate stating that it is of that opinion and stating the day on which, in its opinion, the expenditure in relation to research and development activities referred to in paragraph (a) or (b) was incurred or the actual expenditure in relation to research and development activities referred to in paragraph (c) exceeded the expected expenditure in relation to research and development activities referred to in that paragraph, as the case may be.
	(7)	The Board must not give a certificate under subsection (6) that affects a company or companies unless the Board has:
	(a)	given written notice to the company or each company stating that the Board is considering giving the certificate and telling the company of its reasons for so considering; and
	(b)	given the company or each company a reasonable opportunity to make a written submission in relation to the matter; and
	(c)	if such a submission is made within a reasonable time—had regard to the matters raised in the submission.
75  Subsection 39S(1)
Omit “or subsection 39P(3)”, substitute “, subsection 39P(3) or 39PB(3)”.
76  Paragraph 39T(1)(b)
Omit “or 39P(4)”, substitute “, 39P(4) or 39PB(6)”.
77  Subsection 42(2)
After “subsidy” (first occurring), insert “(other than a subsidy by way of a loan)”.
78  At the end of paragraphs 46(2)(a), (b) and (c)
Add “and”.
79  At the end of subsection 46(2)
Add:
	; and (e)	must include particulars of any advice given to the Board or a committee by the Minister under section 20A but need not state whether the Board or committee acted in accordance with the advice.