Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (No. 3) 1996 No. 78 of 1996 - SCHEDULE 4

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 to limit the period for amending
assessments to give effect to provisions relating to
deductions for expenditure on research and
development activities 11 Subsection 170(10) Omit "or 73B, sections 73C, 73CB
and 73D". 12 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. 13 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 3-Amendments relating to deductions for interest payments 14
Subsection 73B(1) (after paragraph (d) of the definition of aggregate research
and development amount) Insert:
and (e) interest expenditure; 15 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. 16 Subsection 73B(1) (definition of research and
development expenditure) After "core technology expenditure", insert ",
interest expenditure". 17 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. 18 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 4-Amendments relating to feedstock expenditure 19 Subsection 73B(1)
Insert:
eligible feedstock expenditure has the meaning given by subsection (1A). 20
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. 21 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. 22 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. 23 Subsection 73B(1) (definition of research and
        development expenditure) Before "or expenditure incurred in the
        acquisition or construction of plant", insert ", feedstock
        expenditure". 24 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". 25 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. 26
        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. 27 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. 28 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 5-Amendments relating to core technology expenditure 29 Subsection
73B(1) (at the end of paragraphs (a) and (b) of the definition of aggregate
research and development amount) Add "and". 30 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 31 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. 32 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". 33 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:
Undeducted past - Current year core technology
      expenditure            adjustment amount
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. 34 At the end of paragraphs 73B(27B)(b)
and (c) Add "and". 35 After paragraph 73B(27B)(c) Insert:

   (d)  the company receiving or being entitled to receive an amount from the
        disposal of core technology; 36 Subsection 73B(27C) Omit "or (c)",
        substitute ", (c) or (d)". 37 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. 38 Application The amendments
made by this Division do not apply to core technology expenditure incurred by
a partnership.
Division 6-Amendments relating to pilot plant 39 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 40 Subsection 73B(1) (at the end
        of paragraph (c) of the definition of plant) Add "other than post-23
        July 1996 pilot plant". 41 Subsection 73B(1) (paragraph (a) of the
        definition of plant expenditure) After "plant", insert "other than
        post-23 July 1996 pilot plant". 42 Subsection 73B(1) (paragraph (b) of
        the definition of plant expenditure) After "plant", insert "other than
        post-23 July 1996 pilot plant". 43 Subsection 73B(1) Insert:
post-23 July 1996 pilot plant means pilot plant referred to in subsection
(4C). 44 Subsection 73B(1) (definition of research and development
expenditure) After "plant", insert "or pilot plant". 45 Subsection 73B(1)
(definition of written-down value) Repeal the definition, substitute:
written-down value has the meaning given by subsections (4A) and (4B). 46
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:
Cost - (Cost x Number of deductible years)
             (              3                    )
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:
Qualifying expenditure - Notional deductions 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 6 2/3     40%

    3       6 2/3 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.
        47 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. 48
Subsection 73B(20) After "(21),", insert "(21A),". 49 Subsection 73B(21) After
"plant" (first occurring), insert "(other than post-23 July 1996 pilot
plant)". 50 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. 51 Subsection 73C(9) Omit "subsection 73B(14)",
        substitute "subsections 73B(4E) and (14)". 52 Application The
        amendment made by item 51 is taken to have come into effect at 5 pm,
        by legal time in the Australian Capital Territory, on 23 July 1996.
Division 7-Amendments to clarify the meaning of research
and development activities 53 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". 54 Subsection 73B(2)
Repeal the subsection. 55 Subsection 73B(2A) Omit "investigative or
experimental", substitute "investigative and experimental". 56 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. 57 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 58
Subsection 4(1) (at the end of paragraphs (a) and (b) of the definition of
agreement under this Act) Add "or". 59 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). 60 Subsection 4(1) (at the end of paragraphs (a)
and (b) of the definition of application) Add "or". 61 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). 62 Subsection 4(1) (at the end of paragraphs (a) and (b) of
the definition of subsidy) Add "or". 63 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). 64 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". 65 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. 66 After subsection 34A(1) Insert:

(1A) The Board must not enter into an agreement under subsection (1) after the
commencement of this subsection. 67 Before subsection 39P(1) Insert:

(1A) This section has effect subject to section 39PA. 68 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:

   (a)  before the commencement time, an application was made 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;
        and

   (b)  by the commencement time, the Board had not, in respect of the
        application, registered or refused to register the companies jointly;
        subsection (1) does not prohibit the Board, in respect of the
        application, from registering the companies jointly.

(4) 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.

(5) 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. 69 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), (3) or (4) of the Industry Research and
Development Act 1986, be prohibited from effecting the registration after the
commencement of section 39PA of that Act. 70 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. 71 Subsection 39S(1) Omit "or
        subsection 39P(3)", substitute ", subsection 39P(3) or 39PB(3)". 72
        Paragraph 39T(1)(b) Omit "or 39P(4)", substitute ", 39P(4) or
        39PB(6)". 73 Subsection 42(2) After "subsidy" (first occurring),
        insert "(other than a subsidy by way of a loan)". 74 At the end of
        paragraphs 46(2)(a), (b) and (c) Add "and". 75 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. [Minister's second
reading speech made in-
House of Representatives on 31 October 1996
Senate on 25 November 1996]