12Factory cost

12 Factory cost

(1) For the purposes of this Act, the factory cost incurred by a producer in the course of the manufacture of bountiable equipment A or the modification of bountiable equipment B includes: (a) 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 producer; and (b) other costs incurred by the producer in connection with the manufacture or modification, as the case may be, and packaging of the equipment including: (i) salaries, wages and other remunerations; (ii) costs of parts and materials (including the cost of wastage) delivered into the store of the producer; and (iii) the cost of any process carried out, or any production service provided, by the producer or another person. (2) For the purposes of this Act, where, in an accounting period of a producer who is a manufacturer of bountiable equipment A, the producer: (a) meets expenditure on research and development; or (b) incurs design, system engineering, software or testing costs; in respect of bountiable equipment A of a kind that is, or is likely to be, manufactured in Australia, by the producer, the factory cost incurred by the producer in that period in connection with the process or processes in the manufacture of bountiable equipment A carried out at registered premises shall include that expenditure or those costs, as the case may be, but no other factory costs shall include that expenditure or those costs, as the case may be. (3) For the purposes of this Act, where, in an accounting period of a producer who is a modifier of bountiable equipment B, the producer: (a) meets expenditure on research; or (b) incurs design, system engineering, software or testing costs; in respect of bountiable equipment B of a kind that is, or is likely to be, modified in Australia by the producer, the factory cost incurred by the producer in that period in connection with the process or processes in the modification of bountiable equipment B carried out at registered premises shall include that expenditure or those costs, as the case may be, but no other factory costs shall include that expenditure or those costs, as the case may be. (4) For the purposes of this Act, where, in an accounting period of a producer who is a manufacturer of bountiable equipment A, the producer receives from the Commonwealth, from a State, from a Territory or from an authority of the Commonwealth, of a State or of a Territory, a grant in respect of the manufacture of, of research relating to the manufacture of, or of development relating to the manufacture of, bountiable equipment A of a particular kind, the factory cost incurred by the producer in that period in connection with the process or processes in the manufacture of bountiable equipment A of that kind carried out at registered premises shall be reduced by the amount of that grant. (5) For the purposes of this Act, where, in an accounting period of a producer who is a modifier of bountiable equipment B, the producer receives from the Commonwealth, from a State, from a Territory or from an authority of the Commonwealth, of a State or of a Territory, a grant in respect of the modification of, of research relating to the modification of, or of development relating to the modification of, bountiable equipment B of a particular kind, the factory cost incurred by the producer in that period in connection with the process or processes in the modification of bountiable equipment B of that kind carried out at registered premises shall be reduced by the amount of that grant. (6) For the purposes of this Act, the factory cost incurred by a producer in connection with processes in the manufacture of bountiable equipment A or in the modification of bountiable equipment B does not include: (a) costs of general administration (other than factory administration), including, where the producer is a body corporate, corporate expenses; (b) selling and service charges; (c) sales tax in respect of completed equipment or equipment that has been modified, as the case may be; (d) tax on income, other than tax on income deducted in respect of the wages, salaries or other remuneration of employees; (e) costs incurred after the completion of the manufacture or modification, as the case may be, of the equipment, other than costs of, or relating to, the testing or packaging of the equipment at registered premises; (f) without limiting paragraph (e), the commissioning and installation of completed equipment or equipment that has been modified, as the case may be, for the intended user of the equipment, whether or not the user is the producer; (g) the value of perquisites provided to employees of the producer (including, where the producer is a body corporate, staff of that body corporate) that does not form part of their taxable income; (h) profit; (j) bonuses paid out of profits; (k) costs charged or levied on the producer by an associate of the producer that are not costs actually incurred by the associate; (m) interest, other than interest on money borrowed from another person for the purpose of financing: (i) bought‑in material and stock; (ii) work in progress; (iii) research and development; or (iv) the purchase of production plant, production equipment, or factory buildings, owned by the producer; (n) 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 producer; (p) depreciation of machinery, plant or equipment other than depreciation of machinery, plant or equipment, owned by the producer 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; (q) losses incurred on the sale or other disposal of buildings, machinery, plant or equipment; (r) long service leave, other than provision for such leave; (s) severance pay, other than severance pay in relation to service during a period that is within the bounty period and during which the producer was a manufacturer of bountiable equipment A or a modifier of bountiable equipment B, as the case may be; (t) freight, and costs relating to vehicles, incurred in respect of the delivery of completed equipment or equipment that has been modified, as the case may be; (u) royalties; (w) the cost of the right to use a patent, manufacturing design or process including software; (x) the cost of superannuation and similar schemes, other than such cost allowed by the Commissioner of Taxation for the purposes of a law of the Commonwealth relating to Taxation; (y) workers’ compensation, other than insurance premiums for such compensation; (z) the cost to acquire, recondition or repair any used machine, components, parts or materials that form part of the equipment; (za) the cost of any parts or materials on which bounty has been paid or is to become payable to the manufacturer under the Bounty (Computers) Act 1984 or the Bounty (Metal‑working Machine Tools) Act 1978; (zb) the cost of tooling that is a part or an accessory for bountiable equipment; and (zc) such costs (if any) as are prescribed.