Tax loss incentive for infrastructure projects

26 November 2011

The Government has announced a new infrastructure tax loss incentive to promote private investment for infrastructure projects designated to be of national significance.

The incentive allows the value of carry forward tax losses attributable to designated infrastructure projects to be uplifted by the 10 year Government bond rate. In addition, tax losses attributable to designated infrastructure projects will also be exempt from the continuity of ownership test and the same business test.

A project will be a designated infrastructure project if it is on the Infrastructure Australia’s National Priority List of projects and considered ‘Ready to Proceed’ or ‘Threshold’ and is approved by a decision maker.

If this feels a little like déjà vu, then you’d be right in thinking we’ve been here before. The discussion paper appears to be attempting to address the lack on investment in infrastructure over the past decade or so.

Tax-effective infrastructure rules were significantly cut back in the late nineties by the then Government, citing the cost, loss of revenue and to fund election promises. The impact however has been a fall in Australia’s global standing for infrastructure investment.

While this is a step toward making infrastructure investment a more attractive proposition, there isn’t a great deal of law in place yet regarding the tax loss incentive, and that could have an impact on the viability of the projects that may be considered by private investors.

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