Senate Economics Legislation Committee, , 6:22:32 to 6:46:27
DISR discusses the administration of the R&D tax incentive and the modeling of fossil fuel exports under net zero targets.
Topics: Agricultural research and levies, Fossil fuels, Exports
Speakers: Senator Susan McDonald, Dom English, Senator The Hon Tim Ayres, Senator Steph Hodgins-May, Senator Richard Colbeck, Julia Pickworth, Matt Crawshaw, Senator Lisa Darmanin, Simon Draper, Troy Sloan
I've got some questions on the R&D tax refunds. Is this the correct bench? Um, Empire Energy now called Betaloo. Oh, sorry. I'll just wait for your colleagues to join. >> Empire Energy, now called Betaloo Energy Australia, have claimed R&D tax credits every year since 2020, now totaling $64 million. However, the income tax assessment act prevents R&D credits for exploring or drilling for gas, which is precisely what that company is doing in Bealoo. Um, what activities is it doing to be eligible for R&D tax credits?
>> Uh, Matthew Kchaw, acting head of division for commercialization division. Uh, I can't disclose the activities of claimants of the R&D tax incentive due to it protected tax information. Uh, not
after the IP or the technical details of what they're doing. I'm asking for the general activities that they are doing to earn R&D tax refunds to ensure the 604 million they have is in compliance with the law which is our responsibility.
>> Senator, I can't disclose the activities of the company specifically. >> [clears throat] >> We can talk in general terms about resources exploration companies and how that is administered [clears throat] in the course of the program in in I do stress general terms and how we interpret that how we apply it in the course of the programs and our riskbased settings but yeah not not individual companies activities.
>> Well it just feels like we've got a bit of a tension here because the Senate does have constitutional power to ensure that the laws are being administered lawfully by the government. So I am going to keep insisting on an answer here. Um, and I do have advice from the cler that I can table as well in
The official would happily take them on
notice. Senator,
>> I said I think you pressed on the issue that official will happily take the questions on notice for you.
>> And Senator, if it's useful, we can certainly explain how we administer the um resources exploration exclusion um in general terms and the kind of as as um Mr. Craw said the approach we take in terms of risk based program administration um we are constrained under the um uh under legislation around
>> we're just very concerned that you actually won't answer on notice that is um I've asked questions of this nature in Senate estimates before we've gone to the trouble of getting advice from the clarks and that advice states that the parliament is not constrained by these confidentiality provisions um department officials can answer them and I'm happy to go into camera if the chair um is of the that that is required.
>> Senator, um we're we are happy to answer to the extent of what we can answer. Um perhaps if you we can we can as I've suggested go through some of the fossil fuel um kind of you know our resources exploration exclusions um and at the point where we think we have hit the limits of what we can talk about um then either take it on notice or or or to the chair on how we could approach that.
>> We we we need a chance to have a look at
the letter. Perhaps I can come back after the next block of questions once once you've had a look at the letter. um because I just don't have any confidence based on what we're not hearing today that these $64 million um are being that are being claimed in tax refunds are indeed lawful. So um perhaps
>> if you I mean do you want to hear the um general answers from the officials now?
>> Um perhaps you could tell me whether any
>> No, I have I have >> Oh, you have? [clears throat]
>> Yes. Uh perhaps instead can you tell me whether the department has taken any audit or enforcement action in relation to R&D claims? >> These type of R&D claims
[cough and clears throat] Senator the resources exploration is is absolutely something that factors into our riskbased program administration settings and so we do look for that sort of information in the course of a claim.
So, but have any has the department taken any audit or enforcement action in relation to R&D claims of this nature?
>> Uh, I would have to take that on notice, but in of a general nature, but I can't comment on any enforcement about an individual claimant,
>> but but about any any um mining corporations claiming this R&D. So there
have been mining and exploration issues that have received compliance attention in recent years and some of those have gone to the art and whatnot.
>> So I I suppose um I understand then that the chair is going to consider this and we can you take some time to resolve this issue. Um
>> yeah. Okay. So if you conclude this line of questioning and we can move on and come back.
>> Yeah. Look, I I suppose just what I'll say, I'm hoping we can get some resolution, but it this does feel like an extremely serious issue that we are going to potentially need to address in R&D legislation that the government is sending to the Senate today if we can't get the information required to determine whether these are lawful or not. >> So, I'll return shortly. Yeah.
>> Well, um we need to have a look at the letter so we can come back to you.
matter but the we need to get advice about your the letter that you've received as well.
>> Yeah. And so it might not get resol but can we let's rotate the call and we will take this discussion offline. >> So you finished your
>> it's only a short document about 10 minutes or so.
>> I know that but um the content of it may require more than a short moment to
>> I'll talk to you shortly
>> um digest. Okay. So let's go to Senator McDonald. >> Oh, okay. Senator Colbeck.
>> So, so just going back to that discussion we had around the the funding.
>> So, Senator, I might just just pause for a second and we'll just grab the right officials back up to the table if we're resuming um aluminium.
So, so in terms of of of the funding, the the $2 billion for the green energy uh sorry, green aluminium production credit scheme, that was $2 billion. You've you've spent on the three smelters something close to 2.4. So, where do where do we find all of that in the budget?
>> Well, the the of course these are um in relation to two of the facilities recent decisions. uh you'll see those accounted for uh in the normal way. I mean in shortand we we committed $2 billion over over the period. It wasn't $2 billion expended in the year that it was committed was $2 billion in uh production credits. Um we have basically uh delivered on that commitment and more um securing the the already hydrobased facility as well. kind of rolled up our sleeves and delivered a approach here that more than acquits uh what uh we set out to do. It will effectively decarbonize 70% of Australia's aluminium production.
>> I'm I'm curious about the budget. We can do do all the other detail stuff later.
>> We're not in a position to tell you today because we are still in budget and myo processes and they will be
>> the simple answer is look at myo.
>> Yes. Yes. and be happy to answer questions in.
>> So, so can I go to um Liberty Bell Bay and I just just a quick question with respect to where that's at with respect to the site and of course the site is in the control of administrators now. So >> we're not in control. >> Yeah. >> But we're a party to the process. Um what can you tell us about where that's
>> I I I'll take Senator. Thank you for the question. So we are as the minister said it's in the and as you said senator it's in the hand of the the liquidators at the moment. Uh they are working very closely with the Tasmanian government and we are working very closely with the Tasmanian government and the liquidators as well. Uh the plan is to hand the site back to the Tasmanian government and um through the um coordinator general uh to uh look at proposals to to um use that land uh for uh some sort of investment uh or some sort of um economic activity given it.
>> So taking advantage of the fact that it's got a heavy industrial planning overlay to
>> and a very port >> and a very good port as well. Yes. close
to a port and in a heavy industrial district utilize that for um an appropriate heavy industrial
purpose. [clears throat] If I can add to Mr. loans. So yes, industrial facility, industrial planning, deep water port, >> really skilled work is pretty deep >> is >> pretty deep uh really skilled workforce and capability there and the kind of industrial system around it of small and medium engineering firms supply chain. It's, you know, if you're if you're listening, it's an excellent place uh for firms who are interested in industrial production to
>> I never thought I'd say we'd be on a unity ticket on something, Senator um Minister, but I'll go with you on that one.
>> I've never doubted it.
>> Thank you. Thanks, Chair.
>> I think I think Susie Senator McDonald, >> sorry. Let's rotate to Senator McDonald. >> Thanks. Thank you. It's a team effort >> Terrific. Thank you. Uh look, these questions um may have been better placed to corporate, but I understand some of the corporate representatives are still here. Um I want to turn to the uh Australia's net zero transformation modeling. The forward states that the Abenei Labor government has a clear and credible net zero plan to carefully manage and maximize benefits of this economic transformation helping Australia to attract investment, lift wages, grow living standards, create jobs, spread economic opportunity around the country. We heard from the Treasury yesterday uh that their modeling wasn't actually tracking reality. That's my word. and in fact did not incorporate the most recent data on these exports. Uh and the ABS this morning struggled to outline what information they had on it. So I just want to understand is D are tracking the impacts of the net zero transformation on the jobs investments and salaries for Australians. Not sure who I'm directing that to. Mr. D. >> We're just getting the right people to
>> I guess at a practical level I'll just answer very quickly Senator I don't want to annoy you. Um the uh and officials can give you more detail. I mean we've just traversed you know decarbonizing 70% of Australia's aluminium sector. Um so the the um six or so thousand jobs in the Hunter Valley, the jobs in central Queensland, they're all green jobs now, Senator. um they are uh protected
>> Will the department now reallocate them as [clears throat] green jobs? Will they be retagged?
>> Do you know what I focus on? Bluecollar jobs in regional centers and outer suburbs. That's we are charged with >> delivering the industrial investment that is required for the future.
>> So my specific question I guess to you Mr. English as a chief economist is just understanding uh when when there is um models like the net zero transformation and the intergenerational report which just points back to the net zero transformation report just trying to track who is keeping uh keeping the data and whether or not you know this is all rhetoric or whether or not we go back to some base data to confirm or otherwise the trajectory that's being >> Well, to date, Mr. Draper, I've been unable to get any department. I've been to Treasury. I've been to DQ. >> Here I am at Daer asking who's actually got data that supports the detail of this modeling. >> And and excuse me, please, Minister, let me finish. And and to date, we have had a lot of rhetoric around it's a projection. We don't break it down into individual commodities. We don't track individual jobs like that. So what we've got is some high level rhetoric. But I'm an accountant by trade. At some point we have to have proof points of how that modeling has been developed and and at some point we need to be able to work towards well has this played out the way we thought it had and then be able to extrapolate to revenue figures and specifically yes I was s seeking specifics on uh commodity breakdowns of exports uh, and you would have seen the data that I'm referring to, the the the mapped collapse of coal and gas and the the growth of green exports and and when you put things on those labels, then you need to be able to drill down somewhere and say, what makes that up? Where's the numbers that support that? And those forecasts, did we hit them? and and so there's exports, jobs, revenue, all of these elements uh come into it. And it's a little bit tricky because the net zero modeling is often based on tracking emissions which is based on tonnages whereas Treasury talks about exports in dollars. And so now we've got exchange rate impacts and a whole lot of other elements coming into that. All I'm seeking to do is come back to data that supports the modeling and given that now some of these numbers are getting quite close the data that supports how are we going are we on track are we behind are we ahead that's all I seek to do >> I'm not sure we can date and thank you minister you're going to have some political interpretation I just want to know the department.
>> A practical a practical answer, I suppose. I'm not sure we can really help
>> Nobody can help you. >> We can we can Sorry. Allow me to Allow me to finish. Treasury, >> allow me to finish. You can help me.
>> You made an effort to explain yourself. Just let me have a crack at it. >> Um not sure we can really help you. These are labels that we do not use. >> Um we we do not use transition. >> We are we are we are all about
>> The report does
>> we're all about delivering industrial investment. You you you are fixated on the labels. We are fixated on the jobs.
>> No, no. That's
>> uh 40,000 or so jobs thus far through these industrial smelter interventions. Many of them in Queensland.
>> He will explain to you.
>> That's what that's what we're on about. I don't think we can help you with this line of inquiry. I don't it doesn't make
>> I think um have you finished answering the question there, Senator? Do do you want to ask any follow-up question or
the officers? So I am told that that DACA's work informs the net zero transformation treasury modeling analysis. Do you have data that supports the report and the modeling?
Um Doming, [clears throat] chief
economist. Senator, the statement that our data informed the Treasury modeling uh is correct. At the time that modeling was prepared, uh we were one of a s range of inputs that Treasury used to uh baseline their model to use uh a range of data sources. The uh obviously that modeling is now a few years old. So um uh predates me to some degree. So there's particular elements of that work. I may have to take some of it on notice. But uh at the end of the day what they get from us you have access to on a free and public basis through the resources and economic quarterly publication which is our main effort at looking ahead at the trajectory of uh the um experience for Australia's resources and energy exports export sectors. Obviously there's some uh differences in the approach that you take to different exercises depending on the question you're exploring. And so we in the resources and econ energy quarterly publication aim to have a look at the factors that are driving the 5-year outlook for earnings from uh those high value um uh resource sectors that Australia enjoys to see volumes, prices, the international environment and how all those things uh will interact in the near term that's quite different to the question that the net zero modeling process was asking which was what would be required to achieve a range of different scenario outcomes. So I think it would be fair to say much like we use a range of sources when we do the re the the resources and energy quarterly to produce our forecasts. We rely on a number of subscriptions from commercial sources. We look at range the public sources from international agencies. Uh Treasury used our input to help inform the way they approach that
So would DA have provided data that demonstrated such a decline in fossil fuel exports that by 2032 they had been overtaken by green exports.
>> So Senator uh firstly the the the modeling I understand was completed in 2024 and we run a 5-year forecast. though uh we didn't do anything that would have made a 2032 picture uh come to life uh to be blunt in in our usual 5-year forecasting process. uh but um uh we also uh were part of again the discussion between economists about how the modeling might be done but uh we don't have an explicit special uh special skill set in modeling uh some of those green uh commodities that were being described in that in that work because that's there are range of agencies around the Commonwealth have an interest in
So can I just to pick you up on that? So Treasury used the uh the 2025 REQ 5-year forecast >> that went to 2930.
>> I I believe it was the 2024 to get to 25 20 28 29, but I'll confirm that and correct if I need to, Senator. Um, and as I say, the question we ask on the wreck, it's a useful input to them to think about market conditions, but the question they're asking, the modeling was inherently a much more scenario-driven exercise of what would it uh what would occur if the various net zero ambitions under a range of policy scenarios were being achieved, what would change for the shape of economic opportunities facing Australia and our our economic opportunities. So I think I think again I don't want you to take that they simply picked up the wreck dropped that in and said hey presto that's the result. It is part of the tapestry of information they were using to ask the question what will drive uh the changes in the economy if we were to see those net zero goals
being achieved. So in order for the net zero targets to be met um to meet the government's targets, so then you would have to see the fossil fuels exports decline for the government to hit its own targets.
>> No, no, that is the like that is not the position. It hasn't been the position of successive governments. you just heard >> like that is that is a that is not a kind of sensible way of characterizing what is happening here. There are two
>> what data would have been based on them.
>> There there are two sets of issues here.
>> We have no data.
>> Number one, what is Australia doing in terms of its domestic settings? In terms of the sector that you're concerned about, the coal sector that has some impact but not much. >> The big question for the coal sector is the the overwhelming part of the coal sector is export coal. But but there's been no data export what export markets do. Senator, it it's not a function of what the Australian government does. It's a function of what export markets do. Now,
>> what did you base that on, Minister? >> Record years of coal growth for the last 3 years.
>> Common sense. Sorry, you're wandering off to a different kind of proposition. It is not the government.
>> This is a government that's making up the data to suit its net zero targets and it doesn't care who it hurts about
industry gone Australian tax over the
pragmatic approach.
>> A disaster approach.
It's a fallacy of mixing a prediction with actually is happening. This round