Commonwealth Numbered Acts

DEVELOPMENT ALLOWANCE AUTHORITY ACT 1992 No. 99 of 1992 - SECT 5

5.(1) This section sets out an example of how this Act will work in a typical
case involving the establishment of a new factory.
NEW FACTORY
item of plant "A"
item of plant "B"
item of plant "C"
ancillary items of plant (Step 1 - proposal to establish a new factory)

(2) During the 3rd quarter of 1992, a manufacturing company develops a
serious, commercially viable proposal to carry out a project consisting of the
establishment of a new factory in Australia. The project involves the company
incurring expenditure in acquiring new plant for use in the factory. The
elements of the plant expenditure are:
. major items of plant "A", "B" and "C", which are the main components of the
production line; and
. ancillary items of plant (such as light fittings, ventilation equipment and
pollution control devices). The factory will be used by the company to produce
goods for sale. The company will derive assessable income from the sale of the
manufactured goods. Both the effective and nominal rates of industry
assistance are less than 10%. The total capital cost of the project (including
the plant expenditure and the cost of constructing the factory building) is
$65 million. The projected timetable for the project is as follows:
. regulatory approvals obtained - March 1993
. first contracts entered into - April/May 1993
. construction of factory commences - June 1993
. plant installed in factory - May 1994
. factory in operation - June 1994. (Step 2 - application for registration of
plant expenditure)

(3) On 20 November 1992, the company applies to the DAA for registration of
the plant expenditure proposed to be incurred by the company in carrying out
the project. (Step 3 - grant of registration of plant expenditure)

(4) The DAA grants registration. The registration is subject to a condition
requiring the company to give to the DAA, before 1 July 1995, certified copies
of the relevant regulatory approvals. (Step 4 - application for pre-qualifying
certificate relating to plant expenditure)

(5) By October 1993, a substantial commitment to the completion of the project
has occurred and the company has complied with the condition of the
registration relating to the giving of certified copies of relevant regulatory
approvals. It is reasonably likely that the competitiveness test set out in
Division 4 of Part 2 will be passed. On 28 October 1993, the company applies
to the DAA for a pre-qualifying certificate in relation to the registered
plant expenditure. (Step 5 - grant of pre-qualifying certificate relating to
plant expenditure)

(6) The DAA grants a pre-qualifying certificate relating to the plant
expenditure. (Step 6 - tax effects of certificate)

(7) The pre-qualifying certificate pre-qualifies the plant expenditure for the
tax incentive known as development allowance.