Transport Infrastructure Needs More Funds

The key tax provisions relevant to this type of infrastructure investment are Section 51 AD and Division 16D.

The Ralph Committee recommended that if accelerated depreciation was replaced by an effective life depreciation regime, simpler tax arrangements could be applied to leases over major depreciable assets such as infrastructure. Accelerated depreciation would be replaced by a more appropriate depreciation regime and this would therefore pave the way for repeal of section 51AD.

In addition to the major reforms of the company tax rate and the capital gains tax regime, the Government has announced that rules would be developed for the treatment of leases now caught by Section 51AD and Division 16D.

I expect these to be legislated in the second tranche of business tax reform commencing on 1 July 2001. The Treasurer has already said that the decisions on these second tranche reforms could be made as early as November.

As we work through these issues, I will be focussing on two considerations – firstly, that while it is right and proper for the Tax Office to have a role in clearing the financing arrangements of private sector infrastructure projects, the Tax Office should not be the ultimate determinant of the Government’s transport policy objectives.

And secondly, that in pursuing the sort of PPP approach I have outlined, it would also be necessary to include safeguards to ensure that the mechanism is not used as a vehicle for tax avoidance or abuse.

The Federal Government has also offered a series of tax based concession schemes for major projects. The current program, the Infrastructure Borrowings Tax Offset Scheme (IBTOS) commenced last year.

This scheme falls somewhere between an industry assistance program and the Mansfield project facilitation model.

I am currently reviewing the IBTO scheme in light of the reform of business tax.

The Treasurer also announced as part of our initial response to Ralph that the Government will consider providing investment allowances, along with an expanded strategic investment coordination process, for major projects. Decisions will be taken in due course on how this targeted assistance will be provided, and what form it will take.

I recognise the need for government to play an important role in facilitating infrastructure investment in Australia, be this through partnerships between the private and public sectors or with direct government funding where appropriate. The Government has a wealth of experience in infrastructure investment that is of value to any new project it is involved in.

The continuing availability of quality infrastructure throughout Australia is vital for our continued growth and prosperity. In particular, the availability of quality infrastructure to our regional communities can be significant in providing new opportunities for sustainable economic growth.

Government and the private sector need to work together to provide for all of Australia’s infrastructure needs, with the long-term goal of better services and facilities for the community.