Contact: Paul Glover
Deloitte
Deloitte tax services
02 9322 7315

Contact: Melinda Loew
Deloitte
Media Relations
02 9322 7146

Depreciation and Fringe Benefits Tax reforms will make Australia more internationally competitive, but only goes half way by failing to address key observations of the Warburton-Hendy report, according to Deloitte International Tax Partner, Paul Glover.

“The improved depreciation deductions will save business $3.7 billion on new plant and equipment allowances and $900 million of FBT through reductions in the top personal income tax rate,” he said.

The Warburton-Hendy international tax benchmarking study, released last month, demonstrated that Australia is at risk of becoming one of the least attractive countries in which to do business due to:

• the unavailability of tax relief for acquired business goodwill
• the limited and highly restrictive recognition of tax losses
• the relatively low value for depreciation allowances on investment in new plant and equipment.

“The introduction of increased depreciation allowances for investment new plant and equipment is welcome, but leaves the equally important issues of deduction for business goodwill and losses unaddressed.

“Given that Australia’s corporate tax take as a proportion of total Gross Domestic Product (GDP) is 5.3% compared to the weighted OECD average countries of 3.4 per cent, there should be room for more generous business tax reform. 

“To be more competitive and attractive as business investment destination, additional measures such as tax depreciation for acquired goodwill and tax loss carry-backs are necessary.

“These reforms would put Australia on an equal footing with other OECD countries,” Mr Glover said.

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