6Value added

##### 6 Value added (1) For the purposes of this Act, the value added to bountiable equipment by a manufacturer of the equipment shall be deemed to be the amount that is the factory cost incurred by the manufacturer: (a) in connection with the process or processes in the manufacture of the equipment that was or were carried out by the manufacturer at premises registered under section 20 in the name of the manufacturer; or (b) in preparing for, or arranging, the carrying out at registered premises by another manufacturer of the equipment of a process or processes in the manufacture of the equipment. (2) If: (a) an accounting period, or a part of an accounting period, of a manufacturer of bountiable equipment occurs before 1 January 1996; and (b) in that accounting period, or that part of that accounting period, the manufacturer meets expenditure on research and development in Australia in respect of bountiable equipment; and (c) the bountiable equipment is of a kind that is, or is likely to be, manufactured in Australia by the manufacturer before that day; the factory cost incurred by the manufacturer in that accounting period in connection with the process or processes in the manufacture of bountiable equipment carried out at registered premises includes that expenditure, but no other factory cost includes that expenditure. (3) For the purposes of this Act, where in an accounting period of a manufacturer of bountiable equipment, the manufacturer receives from the Commonwealth, from a State or from an authority of the Commonwealth or of a State a grant in respect of the manufacture of, research relating to, or the development of, bountiable equipment of a particular kind, the factory cost incurred by the manufacturer in that period in connection with the process or processes in the manufacture of bountiable equipment of that kind carried out at registered premises shall be reduced by the amount of that grant. (4) For the purposes of this Act, the factory cost in connection with processes in the manufacture of bountiable equipment includes factory overhead charges (including rent, hire or leasing costs in relation to factory buildings, plant or equipment) apportioned on the basis of a full accounting period of the manufacturer of the equipment. (5) For the purposes of this Act, the factory cost incurred by a manufacturer in connection with processes in the manufacture of bountiable equipment does not include: (a) the cost (including the cost of wastage) of parts or materials delivered into the store of the manufacturer, being parts or materials supplied to the manufacturer for incorporation in the equipment or in the packaging of the equipment; (b) the cost of any parts or materials (whether manufactured or produced by the manufacturer or otherwise and whether or not imported into Australia) that, if they were imported into Australia otherwise than while incorporated in bountiable equipment and were not goods the manufacture of a Preference Country or goods to which Schedule 4 of the Tariff Act applied, would be goods in respect of which duty of Customs would be payable at a rate of duty that exceeds the rate of free; (c) the cost of any process in the manufacture carried out by a person other than the manufacturer or a person employed by the manufacturer at premises registered under section 20 in the name of the manufacturer other than an allowable research and development process within the meaning of subsection (5A); (d) costs of general administration (other than factory administration), including, where the manufacturer is a body corporate, corporate expenses; (e) selling and service charges; (f) sales tax in respect of completed equipment; (g) tax on income, other than tax on income deducted in respect of the wages, salaries or other remuneration of employees; (h) costs (including costs of development and production) of software, other than operating software or software for testing hardware in Australia; (j) costs incurred after the completion of the manufacture of the equipment, other than costs of, or relating to, the testing or packing (excluding the cost of packaging) of the equipment at registered premises; (k) without limiting paragraph (j), the commissioning and installation of completed equipment for the intended user of the equipment, whether or not the user is the manufacturer; (m) the value of perquisites provided to employees of the manufacturer (including, where the manufacturer is a body corporate, staff of that body corporate) that does not form part of their taxable income; (n) profit; (p) bonuses paid out of profits; (q) costs charged or levied on the manufacturer by an associate of the manufacturer that are not costs actually incurred by the associate; (r) interest, other than: (i) interest on money borrowed from another person for the purpose of financing bought‑in material and stock or of financing work in progress; (ii) interest incurred before 1 January 1996 on money borrowed from another person before that day for the purpose of financing research and development undertaken before that day, other than research and development relating to software that is not operating software or software for testing hardware; or (iii) interest on money borrowed from another person for the purpose of financing the purchase of production plant, production equipment, or factory buildings owned by the manufacturer; (s) depreciation of buildings, other than depreciation at a rate of 4% per annum, or, if another rate is prescribed, that other rate, on the historic cost of factory buildings owned by the manufacturer; (t) depreciation of machinery, plant or equipment, other than depreciation of machinery, plant or equipment owned by the manufacturer that is: (i) depreciation allowed by the Commissioner of Taxation for the purposes of a law of the Commonwealth relating to taxation; or (ii) depreciation for which the producer can deduct amounts under Division 40 of the Income Tax Assessment Act 1997; (u) losses incurred on the sale or other disposal of buildings, machinery, plant or equipment; (w) long service leave, other than provision for such leave; (x) severance pay, other than severance pay in relation to service during a period that is within the bounty period and during which the manufacturer was a manufacturer of bountiable equipment; (y) freight, and costs relating to vehicles, incurred in respect of the delivery of completed equipment; and (z) such costs (if any) as are prescribed. (5A) For the purposes of paragraph (5)(c), a research and development process is an allowable research and development process if: (a) it is a process by way of research and development in respect of bountiable equipment; and (b) it is carried out in Australia on behalf of the manufacturer before 1 January 1996; and (c) the bountiable equipment is of a kind that is, or is likely to be, manufactured in Australia by the manufacturer before that day. (6) Where, in relation to a claim for bounty or to a return in accordance with section 16 or otherwise for the purposes of this Act, the CEO: (a) is unable to verify the value added to bountiable equipment by a manufacturer; or (b) forms the opinion that, having regard to sound accounting principles, costs included in factory cost by reference to which the value added to bountiable equipment by a manufacturer is ascertained: (i) are incorrect or overestimated; (ii) are higher than would have been the case if the manufacturer had not marginally costed or similarly disproportionately costed the manufacture of goods in respect of which bounty is not payable; (iii) have been fixed in order to obtain an increase in bounty; (iv) are unduly higher than similar costs incurred by other manufacturers of similar equipment; (v) have been increased as the result of the influence of a relationship between the manufacturer and an associate of the manufacturer; or (vi) are higher than would have been the case if the manufacturer had provided services that were provided, and charged for, by an associate of the manufacturer; the CEO may, by instrument signed by him or her, determine the value added to that bountiable equipment by that manufacturer, being the value that, having regard to all relevant circumstances, the CEO considers to be appropriate, and the value added to that bountiable equipment by that manufacturer shall, for the purposes of this Act, be the value so determined. (7) For the purposes of this Act, where a manufacturer of bountiable equipment manufactures bountiable equipment from other equipment in respect of which: (a) bounty under this Act; or (b) bounty within the meaning of the Automatic Data Processing Equipment Bounty Act 1977; has become payable (whether or not it has been paid), the value added to that first‑mentioned bountiable equipment by the manufacturer does not include any value added to the other equipment by the manufacturer.