TEXTILE, CLOTHING AND FOOTWEAR STRATEGIC INVESTMENT PROGRAM BILL 1999 Explanatory Memorandum

Commonwealth of Australia Explanatory Memoranda

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TEXTILE, CLOTHING AND FOOTWEAR STRATEGIC INVESTMENT PROGRAM BILL 1999

1998-99

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

SENATE

TEXTILE, CLOTHING AND FOOTWEAR STRATEGIC INVESTMENT PROGRAM BILL 1999

SUPPLEMENTARY EXPLANATORY MEMORANDUM

Amendments and new clauses to be moved on behalf of the Government
Requests for amendments to be moved on behalf of the Government

(Circulated by the authority of the Minister for Industry Science and Resources,
Senator the Honourable Nick Minchin)

ISBN: 0642 425965

TEXTILE, CLOTHING AND FOOTWEAR
STRATEGIC INVESTMENT PROGRAM BILL 1999

GENERAL OUTLINE

The amendments to the Textile, Clothing and Footwear Strategic Investment Program Bill will improve the operation of the scheme and clarify areas of potential uncertainty. The amendments are intended to provide for:

• loans to be made under the scheme;

• formulation of the scheme within 14 days of Royal Assent;

• a mechanism for grants to be made in respect of design for manufacture of eligible TCF products offshore;

• special grants to be made in respect of the current financial year in addition to that already provided;

• the exclusion of special miscellaneous grants in respect of TCF-dependent communities from the total grant cap for grants in respect of TCF value-adding;

• the capping of grants payable to an entity based on eligible revenue or eligible start-up investment, depending on their situation;

• greater flexibility in prescribing the financial compliance requirements for entities in line with the Corporations Law;

• interim payments to be made under the scheme;

• administrative powers under the scheme to be vested in the Minister for Industry, Science and Resources, with such powers to be prescribed in the scheme; and

• the ability for the scheme to require participation in a particular benchmarking or management-improvement study as a condition of grant eligibility.

FINANCIAL IMPACT STATEMENT

The mechanism for loans, as well as grants, to be made under the TCF (SIP) scheme will provide flexibility in developing alternative funding arrangements over the life of the program, if considered necessary. The loan facility, while having a neutral impact on the monetary ceiling of the program, would impact on the financial administrative arrangements outlined in the TCF (SIP) Bill.

The total amount for the TCF (SIP) scheme and supplementation to the Regional Assistance Program will remain capped at $700 million.

NOTES ON CLAUSES TO BE AMENDED

Part 1 - Introduction

Clause 3 - Simplified outline

1. The clause is amended to refer to the making of loans in addition to grants under the scheme (see notes on amendment to clause 8).

2. The clause is amended to provide for special grants to be available for 1999-2000 (see notes on amendment to clause 12).

3. The clause is amended so that registration may be required under the scheme (see notes on amendment to clause 16).

4. The clause is amended to delete the reference to audited accounts (see notes on amendment to clause 18).

Clause 4 - Definitions

5. The amendments provide for a definition of designated industry program, importation into Australia and loan.

6. The definition of scheme debt is expanded by the new paragraph (aa) to incorporate loans, and by new paragraph (ab) to incorporate advances (see notes on new clause 18B).

Part 2 - TCF (SIP) scheme

Clause 8 - TCF (SIP) scheme

7. The clause is amended to change the date by which the scheme is to be formulated to 14 days after the date of the Royal Assent.

8. The amendment provides for loans as well as grants to be made under the TCF (SIP) scheme. This provides for flexibility in devising alternative funding arrangements over the term of the program, if considered necessary.

9. The general provision allowing the manufacture elsewhere of eligible TCF products, designed in Australia has been removed. This amendment will close a loophole that could otherwise result in unreasonably high claims under the scheme, and ensure that all aspects of the TCF Post 2000 package can be taken account of.

10. However, new paragraph (c) provides for the design in Australia of eligible TCF products which may be manufactured offshore. Under this paragraph, for an entity to be eligible to claim a grant under the TCF (SIP) scheme, some or all of its eligible products are intended to be sold in Australia. The importation of eligible products, which the entity had manufactured offshore, must be under a designated industry program.

Clause 9 - $700 million cap

11. The amended clause provides for the monetary ceiling applicable to the scheme to apply to the making of loans as well as grants.

12. The new sub-clause (2) provides that loans made have a neutral effect on the operation of the funding cap after the time they have been repaid.

Division 2 - General policy objectives for the grants provisions of the scheme
Clause 10 - General policy objectives for the grants provisions of the scheme

13. The amendments to the above headings reflect that the application of Division 2 is limited to grants provisions. These are consequential amendments arising from the inclusion of loans in the TCF (SIP) Scheme. Clause 10 is also amended to restrict its scope to policy objectives relating to grants under the scheme.

Clause 12 - Duration of scheme

14. Paragraph (b) is omitted and new paragraphs (b) and (ba) are substituted. They prescribe the policy objectives relating to the time frame for claims under the scheme for research and development expenditure, special grants in respect of second-hand TCF plant expenditure, and special miscellaneous grants. Under the amendment, entities will be able to claim benefits under the latter two grant categories for expenditure incurred in the 1999-2000 year through to 2004-2005. The time frame for claims relating to research and development expenditure remains unchanged.

15. Paragraph (c) is amended to provide for payment to be limited to eligible TCF value-adding activities.

Clause 13 - Grants to be made in arrears

16. The amendment inserts new paragraph (aa). It outlines the objective for special grants (that is, special grants in respect of second-hand TCF plant expenditure, and special miscellaneous grants in respect of TCF-dependent communities) to be made to entities in respect of expenditure for eligible activities undertaken in 1999-2000 when a claim is made after the end of the 2000-2001 income year.

17. Paragraph (c) is amended to provide that the time frame for claims under the scheme for value-adding activities is in respect to eligible value-adding activities.

Clause 14 - Cap for grants in respect of TCF value-adding

18. The amended clause sets out the policy objectives on the cap for value-adding for grants under the scheme. Value-adding activities which are considered eligible under the TCF (SIP) scheme in a particular income year will be capped to the total amount received in grants for new TCF plant/building expenditure, TCF research and development expenditure and special grants for second-hand TCF plant expenditure, or 5 per cent of the entity's total eligible value-added, whichever is the lesser. Grants made to entities for value-adding will be calculated without reference to the amount of any special miscellaneous grant.

Clause 15 - Grants cap based on eligible revenue and eligible start-up investment amount

19. The above heading has been changed to reflect the meaning of the new clause 15 for the purposes of this Bill.

20. The purpose of substitutive clause 15 is to set out the policy objectives regarding the grants cap for entities, including those in start-up situations, under the TCF (SIP).

21. Under substitutive clause 15, the total grants payable to an entity must not exceed five per cent of an entity's total eligible revenue in the preceding income year. Under the TCF (SIP) Scheme eligible revenue will be based on the sales value of TCF products that are considered eligible under the scheme, except for entities in start-up situations which would have their grants capped at 15 per cent of the eligible start-up investment amount. Eligible revenue, start-up situations, and eligible start-up investment amounts will be defined in the scheme.

Clause 16 - Registration for the purposes of the scheme

22. Amended sub-clause (1) highlights that the TCF (SIP) scheme may impose requirements for registration under the scheme in order to claim a grant. These requirements will be linked to the registration of specific grants (amended sub-clause (3)). The amendments highlight that certain grants under the scheme may not require registration. These are expected to be the special grants. Sub-clause (3) will provide for the consequences of not complying with registration requirements in the case of registration-linked grants.

Division 4 - Strategic business plans and accounts
Clause 18 - Accounts

23. The above headings are amended to omit the word "audited" before "accounts". Under the Corporations Law, not all companies are required to prepare audited accounts, which would be an additional burden for those companies if made a requirement under the scheme.

24. The amendment of clause 18, including the new sub-clause (2), enables certain entities to provide a balance sheet and detailed profit and loss account in lieu of audited accounts, if provided for in the scheme.

25. Entities may be required to provide audit reports on their statements of eligible expenditure incurred for the purpose of making claims under the scheme. Entities may not be eligible for a grant under the scheme unless they have complied with the requirements imposed by the scheme in relation to audited and non-audited accounts and audited and non-audited financial statements.

Clause 18A - Loans

26. The new clause 18A provides that loans cannot be made under the scheme after an entity’s 2004-2005 income year.

Clause 18B - Advances on account of grants

27. The new clause 18B has been inserted to allow for advances to be payable to participating firms under the TCF (SIP) scheme. This will enable early part payments of grants in an income year subsequent to that in which expenditure has been incurred, pending completion of the financial compliance requirements of the scheme.

28. Sub-clause (2) provides for repayment to the Commonwealth of the excess of any advance payment over the amount of the grant that becomes payable to a participant in the scheme.

Clause 19 - Scheme may confer administrative powers on the Minister or the Secretary

29. The heading of clause 19 is amended and new sub-clause (1A) inserted to reflect that the scheme may confer on the Minister, as well as the Secretary, the power to make a decision of an administrative character. An administrative power includes the power to make advances and loans.

30. Sub-clause (2) is omitted. However, the scheme will remain an entitlement-based program, with an entity's entitlement to a grant of a particular amount to be determined by the Secretary or the Minister, as provided for in the scheme.

Clause 22 - Guarantees relating to payment of scheme debts connected with grants

31. The heading of clause 22 is amended to highlight the application of the clause to grants. The new sub-clause (2) extends the requirements of the provision to a request for an advance on account of a grant.

Clause 22A - Guarantees relating to payment of scheme debts connected with loans

32. The new clause 22A extends the guarantee requirements of clause 22 to applications for loans.

Clause 23A - Participation in accredited benchmarking/management-improvement studies

33. The new clause 23A allows for participation by an entity in benchmarking or management-improvement program accredited under the scheme to be made a condition of eligibility for a grant that is not a special grant, if provided for under the scheme.

Clause 25 - Grants and advances to be inalienable

34. The heading and clause 25 are amended to highlight that the clause applies to advances in addition to grants (that is, grants and advances are inalienable under the scheme, except with the approval of the Secretary).

Clause 26 - Miscellaneous matters

35. The amendment to paragraph (b) provides for entities to make a claim in accordance with the requirements of the TCF (SIP) scheme.

36. New paragraph (ba) is a consequential amendment relating to the deletion of the requirement for an entity to provide audited accounts (see notes on amendment to clause 18).

37. The Bill currently provides for a fee to be payable with a claim for a grant, if provided for under the scheme (refer Section 26 (c)). New paragraph (ca) provides for a fee to be payable with an application for a loan, should the scheme provide for it. Any such fees and the setting of interest rates and penalties for loan payments will be detailed in the TCF (SIP) scheme.

Clause 30 - Variation of scheme

38. Sub-clause (3) amends the date of variation of the TCF (SIP) scheme by providing that the scheme may in effect, be varied after 14 days, from the date by which the scheme must be formulated (see notes to clause 8).

Clause 32 - Appropriation

39. The amendment provides for advances to be paid out of the Consolidated Revenue Fund.

40. Sub-clause (2) provides for loans to be made out of the Consolidated Revenue Fund.

Part 4 - Information-gathering powers

Clause 34 - Minister or the Secretary may obtain information and documents

41. The amendment to the heading and the amendments to sub-clauses (1) and (2) provide the Minister with identical powers to the Secretary in relation to obtaining information and documents under the TCF (SIP) scheme.

Clause 37 - Copies of documents

42. The amendments to sub-clauses (1) and (2) provide the Minister with identical powers to the Secretary to inspect, make and retain copies or extracts from a document produced in accordance with the requirements of paragraph 34(2)(c).

Clause 38 - Minister or the Secretary may retain documents

43. The heading and clause 38 are amended to provide the Minister with identical powers to the Secretary in relation to retaining documents.

Part 7 - Miscellaneous

Clause 48A - Availability of grants

44. The new clause 48A provides that grants need not be made available in a particular income year. This amendment reflects the fact that loans may be made in lieu of grants.

Clause 49 - Uniformity of bounties

45. The amended sub-clause (2) provides that the Minister, as well as the Secretary, must exercise powers or functions under the scheme consistent with paragraph 51(iii) of the Constitution, in recognition of the amendments of clause 19 of the Bill.

Clause 50 - International obligations

46. The amendments of sub-clauses (3) and (4) require the Minister, as well as the Secretary, in performing a function or exercising their powers as provided for in the TCF (SIP) scheme, to have regard to Australia’s international obligations, including the World Trade Organization and the Australia-New Zealand Closer Economic Relations Trade Agreement.

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