\ 1ER'S D& O
a-10 APR 1967
PRESS RELEASE LisRAF~ 44
GRANTS FOR RESEARCH AND DEVELOPMENT
( Statement by Mr. J. McEwen, Acting Prime Minister and
Minictc: for Trade and Industry)
1. The Acting Prime Ilin-Lster and Minister for Trade
and Industry, Mr. McEwen, today announced some further details
of the scheme for Government grants for research and development
mentioned in the Treasurer's Budget Speech of 16th August last.
2. Mr. McEwen said that complete details would be
contained in the legislation which would be introduced shortly.
However, he thought it woul i ceu in . thm eantime to inform
the business community of the broad outlines of the scheme so
that they could organise their affai. rs to derive full benefit
from the incentive.
3. The scheme will operate with effect as from 1st July,
1967 until 30th June, 1972. Before the latter date is reached
the Government will review its ooeration,
4. Mr. McEwen explained that grants would be made only
to manufacturing and mining companies incorporated in Australia
Grants, which will be taxable in the hands of
recipients, will be payable in respect of additional expenditure
on research and development work undertaken by a company during
the currency of the scheme. For these purposes " research and
development" will be defined along the following lines
Systematic experi.'. je: italion or analysis
in the fields of science, engineering
or technology to acquire new knowledge
or to develop new or improved material
products or processes associated with
the production or use of such products.
2.
6. The following activities would not be regarded as
falling within the scope of the above definition
* Market research
* Sales promotion
* Feasibility studies
* Technical service to customers
0 Management studies
0 Labour efficiency surveys, investigation
into incentive wage systems etc.
* Methods engineering
* Operational research
* Routine q~ uality control and routine
materials testing
* Mineral exploration and prospecting.
7, j Mr. McEwen added that the full definition of research
and development which will be contained in the legislation will
exclude the following categories of design work from eligibility
for grants, Design work which arisea from the need
to meet the individual requirements of a
particular user of the product or process;
Design work which is primarily directed towards
styling as distinct from an improvement in the
functional characteristica ( including the
reduction of costs) of the product or process.
Mr. Mc~ wen continued
8. The scheme will apply only to companies which
increase their research and development in Australia as compared
with a base period, For this pu~ cpose, the base year will be the
financial year 1965/ 66.
V 3.
9. Firms must apply for grants and in the first instance,
will be required to establish the extent of their eligible
research and development activities in the base year. Where a
firm was not engaged on research and development in the base year,
its base will be nil.
Grants will be administered in two ways. A firm which
satisfies the administering authority that it has increased its
research and development work as defined, will automatically
qualify for a percentage grant in respect of eligible additional
expenditure up to $ 50,000 a year.
11. A firm which wishes to receive a -Trant in respect
of eligible additional expenditure beyond $ 50,000 a year will
need to obtain individual ( but not necessarily prior) approval
on a selective basis in respect of the excess. Applications
will be assessed in the light of the extent to which the research
and development appears likely to contribute to the following
objectives The development and use of Australian
physical resources;
The expansion of exports;
Import saving and the ability to compete
with im-port s;
Productivity and cost reduction;
Defence capability.
12. The g-, rants will not be paid in respect of all
components of research and development costs. They will be
limited to expenditure on wages and salaries, plant and equipment,
and contracted research and development. Two of these components,
expenditure on wages and salaries and expenditure on contracted
research and development, will be treated together in estimating
their eligibility for grant purposes. The other component,
expenditure on plant and equipment, will be treated separately.
V 4.
13. Wag-es and sala-ries will qualify only in respect
of Drofessional and technical staff engaged in Australia wholly
on research and development. " Professional" staff will be those
who have completed a university degree or technical college
diploma in a branch of science or engineering which admits to
membership of a professional institute. " Technical" staff will
be those % 7ho are directly assisting, in a technical capacity, the
professional staff enga,-ged on research and development. The
wages and salaries of certain other staff categories, such as
secretarial staff, librarians, cleaners, etc., even although they
may be employed wholly in a research and development establishment,
will not qualify for the grant.
14. Grants will be payable in respect of the increase
in eligible via. ges and salaries over the base year 1965/ 66.
In calculating the wages and salaries component in the
base year, firms will be required to include the appropriate
proportion of the salaries of staff during periods when they
were engaged part-time on research and development.
16. In a " g rant year", however, only the salaries of
staff wholly engaged on research and development will qualify.
17. Where ap) propriate, the administering authority will
make an adjustment to the actual amount of increase in a firm's
eligible expenditure on research and development salaries so as
to offset the effect of inflation of salary levels. The adjustment
will be made by recalculating the base year expenditure figure
so as to reflect what that figure would have been if the salary
levels ruling in the grant year had also a,;: plied in the base year.
The adjustment will not a-.-ply in -the case of a firm starting
research and development afresh. In the case of firms already
engaged in research and development, the adjustment will be made
only in respect of staff who were employed on research and
development in the base period in respect of research and
development positions which existed in the base period.
18. For contracted research, firms will be eligible for
grants in respect of increases ( above the 1965/ 66 base) in
payments made to " outside" organisations which have been approved
by the administering authority.
19. Plant and equipment to be eligible must be used solely
for research and development. The aggregate amount of this
component of a firm's grant from the inception of the scheme may
not exceed the net aggregate of the eligible wages and salaries
and the contracted research and development components. This
means that expenditure on plant and equipment will qualify for
grant purposes only when and to the extent that there has been a
qualifying expenditure in the sector comprised of salaries and
wages and contracted research and development. There is a
further condition that no grant will be paid in respect of
expenditure on plant and equipment in any grant year if the sum
of the expenditure on wages and salaries and contracted research
and development is less in that grant year than in the base year.
Subject to these provisos, the method to be adopted in calculating
grants in respect of plant expenditure is as follows
purchases of new research and development plant
and equipment will be eligible for grant purposes
even if the firm's expenditure on this component
is lower than in the base year. That is to say,
expenditure on research and development plant and
equipment is not tied to base year expenditure.
the plant and equipment eligible for research and
development grant purposes is to be regarded as
identical with that research and development
plant and equipment which is allowed by the
Taxataion Commissioner as eligible for
depreciation over three years as provided in
1 6.
Section 73A of the ILncome Tax Assessment Act. It
is to be noted that although Section 73A
refers to " scientific research" this term
embraces many phases of product research
and development.
The rate of grant applying in the automatic cases
will, at least initially, be 50% of the increase in eligible
expenditure. This rate will be the same for all companies.
The rate for selective grants will be determined in each case
by the administering authority but will not exceed 50%. The
rate may vary from one firm to another in the same year.
21. Firms will, of course, be required to substantiate
their claims for grants. It would therefore be advisable for
firms currently engaged in research and development to establish
by 1st July a system under which eligible research and
development expenditure is separately recorded and properly
documented with explanations. It will also be necessary for
firms to keep records of the work upon which professional and
technical staff are engaged so that those wholly engaged after
1st July on research and development can be separated from
those doing work which does not constitute research and
development as defined.
22. MVr. McEwen said that the Government intended to
introduce the legislation during the current session of
Parliament. No grants would be payable until after the
legislation is enacted and the administering authority
established.
23. Mr. MvcEwen added that the scheme would be administered
by an authority responsible to the Minister for Trade and
Industry. 22/ 67T.
CANBERRA, A. C. T.
4TH APRIL, 1967.