Industry Research and Development Act 1986

The Act regulates the Board itself, R&D entities (almost always companies that want the Division 355 tax offset), research service providers that supply contract R&D, and Commonwealth program participants. It also reaches the Commissioner of Taxation, because findings under Part III bind the Commissioner for Division 355 purposes. Consolidated and MEC groups have their own treatment under sections 31, 31A and 31B: the head company picks up "deemed findings" and registrations when subsidiaries join, and continuing findings carry forward to the leaving entity when subsidiaries leave.

For R&D entities, the operative obligation is procedural. To claim the R&D tax offset, the entity must register activities for an income year under section 27A within 10 months of the end of the income year (paragraph 27D(c)) or within a further period the Board allows under the decision-making principles. Applications must be in the approved form (section 32) and accompanied by any fee specified under section 48A. The Board can, under sections 27E, 27H, 28H and 29C, require further information within 30 days or a further period.

For the Board, every reviewable decision triggers a written notice obligation under section 30B that includes the reasons and the entity's right to internal review. The Board must conduct an internal review under section 30D within 90 days or be deemed to have confirmed the decision. The Board must publish a register of research service providers on the internet under subsection 29J(1) and table an annual report under section 46.

Officials of the Board are bound by section 47, the confidentiality provision. They must not disclose "protected information" (information that relates to a matter covered by Part III) where disclosure would breach confidence, save for the carve-outs to the Minister, the Secretary, designated departmental officers, persons exercising functions under this Act, the Census and Statistics Act 1905 or the Income Tax Assessment Act 1997.

For program participants under Part IV, where the counterparty is a State, Territory or section 51(xx) corporation, terms and conditions for Commonwealth payments must be set out in a written agreement between the Commonwealth and the counterparty (subsections 35(1) and 35(2)), and section 35(3) requires those terms to address repayment circumstances.

The Board's central powers are to register R&D entities for activities (section 27A), to make findings about the nature of activities (sections 27B, 27J, 28A, 28C, 28E), to vary or revoke registrations (sections 27M, 27N, 29G, 29H), to register research service providers (section 29A), to require further information (sections 27E, 27H, 28H, 29C), and to charge an inquiry fee up to the higher of $1,000 or any prescribed amount under subsection 29D(3). Under section 27F the Board can examine a registration on its own initiative or on Commissioner request. Under subsection 28E(3) the Board must make a finding when the Commissioner requests one.

The Minister's powers include: prescribing programs by legislative instrument (subsection 33(1)); making decision-making principles by legislative instrument (section 32A); prescribing application fees by legislative instrument (subsection 48A(1), with the constitutional limit that the fees must not amount to taxation); appointing committees and committee members (section 22); giving directions under section 19 (with the section 19(4) prohibition on directions that fix the outcome in a particular case and the section 19(5) prohibition on conferring powers to commit Commonwealth money); and giving non-binding written advice under section 20A.

The Board can delegate by resolution under section 21 to the Chair, Deputy Chair, members, committees or staff. A committee can sub-delegate under section 22A. Ministers and accountable authorities can delegate Part IV arrangement powers under section 36.

This Act is not itself a criminal statute. Its enforcement edge lies in how findings unwind tax positions. Subsection 44(6) is a non-double-conviction safeguard: a person cannot be convicted of both an offence against section 135.2 of the Criminal Code and an offence against sections 136.1, 137.1 or 137.2 in respect of the same application for Commonwealth program money or advance, with subsection 44(7) extending that to orders under section 19B of the Crimes Act 1914. Section 45 lets the Commonwealth institute proceedings within three years of an offence, despite anything in any other law.

The economic enforcement is downstream. A finding under subsection 27J(1) that activities were not core or supporting R&D activities means, by section 27L, that the registration "is taken always to have existed in a form consistent with the finding". That retrospective effect feeds into recovery of overpaid tax offsets. In Commissioner of Taxation v Auctus Resources Pty Ltd [2021] FCAFC 39, the Full Federal Court treated a tax offset refund as "paid by mistake" within section 8AAZN(3) of the Taxation Administration Act 1953 once the Board had made a section 27J finding to the contrary, even if the refund had been validly paid at the time.

Registration applications must be made within 10 months after the end of the income year (paragraph 27D(c)), with discretion to extend under the decision-making principles. The Board can ask for further information under section 27E with a 30-day default response window. The Board must give a written notice of decision under section 27C with a certificate for each finding; a copy goes to the Commissioner.

For findings made on examination of an existing registration, the Board makes them under section 27J only if the application is brought within 4 years of the end of the income year (per the cross-reference in section 27F to ITAA 1997 subsection 355-705(1)). Reviews under section 30D must be conducted within 90 days or are deemed confirmations. Internal review applications under section 30C must be made within 28 days of notice. External review goes to the Administrative Review Tribunal under section 30E, which applies subsections 108(2) and (4) of the Administrative Review Tribunal Act 2024.

For research service providers, section 29E sets the annual continuation cycle: at least two months before the end of each financial year, the Board notifies each provider; if the completed form is not returned within 30 days, the Board may revoke the registration with effect at the end of that financial year.

For Part IV programs, there is no fixed timeline, but section 33 requires the legislative instrument to specify the legislative power supporting the program, and section 35 builds in repayment terms for corporations.

This Act is bolted into the Income Tax Assessment Act 1997 Division 355 system: section 4 imports the key activity definitions, section 27L gives findings ITAA 1997 effect, sections 28A, 28C and 28E findings bind the Commissioner under subsections 355-705(2) and 355-705(3) and enable or disable parts of the offset under sections 355-210 and 355-225. The Public Governance, Performance and Accountability Act 2013 supplies the public accountability spine: the s 89A account, "accountable authority" definitions, and section 37 carving out section 23 of the PGPA Act so accountable authorities cannot independently exercise the section 33 program-prescription power.

The Act also leans on the Pooled Development Funds Act 1992, the Venture Capital Act 2002, the Members of Parliament (Staff) Act 1984, the Public Service Act 1999, the Remuneration Tribunal Act 1973, the Census and Statistics Act 1905, the Criminal Code, the Crimes Act 1914, the Biosecurity Act 2015 (in section 28D(4)(b) for overseas-conduct findings), the Corporations Act 2001 (in section 32C for the alternative constitutional basis) and the Administrative Review Tribunal Act 2024.

The retrospective operation of section 27L is the most important trap. A subsection 27J(1) finding made years after registration treats the registration as having "always" existed in the form the finding requires. In Auctus, that retrospective effect carried the tax-offset refund into "paid by mistake" territory and exposed the taxpayer to recovery as an administrative overpayment. Section 32B reinforces the trap: the Board's power to make a finding does not include the power to vary or revoke that finding (the Acts Interpretation Act 1901 subsection 33(3) is disapplied), so a finding can only be unwound through Division 5 review.

For overseas activities, section 28D applies four cumulative conditions: a paragraph 28A(1)(a) or (b) finding that the activity is itself an R&D activity; a "significant scientific link" to Australian core activities (defined in subsection 28D(3) so that the Australian core activities cannot be completed without the overseas activity); inability to be conducted solely in Australia for one of the listed reasons (facility/expertise/equipment, Biosecurity Act 2015 or quarantine, population, geographical/geological feature, regulation); and an expenditure rule that overseas-activity spending is less than spending on Australian core and supporting activities.

For consolidated and MEC groups, section 31 is unforgiving: the subsidiary member's registrations and findings have no effect to the extent they cover the period the subsidiary is in the group. Section 31A pulls findings up to the head company at joining time as "deemed findings"; section 31B pushes them back down to the leaving entity as "continuing findings".

The Minister's section 19 direction power has guardrails: it cannot fix outcomes in particular cases (subsection 19(4)) and cannot confer authority to commit Commonwealth money (subsection 19(5)). The Minister's section 20A advice power also cannot relate to a particular person.

For research service providers, missing the section 29E annual continuation deadline is fatal for that financial year unless a further period is allowed under the decision-making principles. The section 29D inquiry fee is capped at the higher of $1,000 or the prescribed amount and must not amount to taxation.

A mining technology company registers a coal-related activity under section 27A as a core R&D activity for an income year. Three years later the Board examines the registration under section 27F and makes a section 27J finding that the activity was not a core R&D activity. By section 27L the registration is taken always to have existed without that activity, the Commissioner can recover the tax offset refund as an administrative overpayment under Taxation Administration Act 1953 section 8AAZN(3), and the only path back is internal review under section 30D and external review by the Administrative Review Tribunal under section 30E.

A biotechnology entity wants to run part of a clinical trial overseas. It applies under sections 27A and 28A for advance findings, then under section 28C for an overseas-activity finding. The Board considers section 28D: subsection (1) requires an existing 28A(1)(a) or (b) finding; subsection (2)-(3) require the Australian core activities to be unable to complete without the overseas activity; subsection (4) requires an Australia-only impossibility (for example, access to a population of patients not available in Australia); subsection (5) requires lower overseas spending than Australian spending. If any condition fails, the offset is unavailable for that overseas activity.

A research service provider registered under section 29A misses the section 29E continuation form deadline. Two months before financial year end, the Board sent a notice; the provider does not return the form within 30 days. The Board may revoke the registration under subsection 29E(2) with effect at the end of that financial year. The provider can apply for internal review under section 30C within 28 days, and on to the Administrative Review Tribunal under section 30E.