Capital Allowances for Depreciating Assets: A Successful Reform?
BUSINESS TAX REFORM: MEET THE CRITICS, No. 24, pp. 217-264, Geoffrey Lehmann, ed., Australian Tax Research Foundation, 2007
43 Pages Posted: 3 Apr 2008 Last revised: 10 Apr 2008
Following the Review of Business Taxation in 1999, Australia enacted significant changes to its capital allowances regime for business assets. This paper examines the policy and legal aspects of this reform. Overall, the reform was successful in removing accelerated depreciation while lowering the corporate tax rate, broadening the tax base and in introducing new and broad concepts including depreciating assets; holder; and an expansive definition of cost into the tax statute. However, complexities remain in the legislative drafting, demonstrating the difficulty of eliminating older forms of legislative language in a major statutory reform. Assets subject to leases and rights, or partly used for private purposes, are still subject to complicated regimes. Sectoral industry concessions are creeping back into the system, at significant cost to revenue. Finally, this paper observes that Australia still lacks a comprehensive regime for depreciating the capital cost of business intangibles including know how, acquired goodwill, trade names and similar assets, in light of current accounting standards and of regimes in the United States and the United Kingdom.
Keywords: accelerated depreciation, reform, business tax, Australia
JEL Classification: K34
Suggested Citation: Suggested Citation