Tax Loss Reform for Taxpayers Undertaking Infrastructure Projects
Yesterday the Federal Government released a discussion paper regarding tax reform that will encourage more private investment in infrastructure projects. The proposed reforms provide significant concessional treatment for tax losses incurred by companies and trusts in respect of designated infrastructure projects that are considered to be of national importance.
Currently, tax losses that are typically incurred at the start of an infrastructure project may not be able to be claimed against taxable income derived by the same entity in future income years because those losses fail the loss recoupment rules.
The proposed new rules will:
- Switch off the loss recoupment rules for tax losses incurred on designated infrastructure projects; and
- Uplift the value of such tax losses by the 10 year Government bond rate.
The changes provide a great deal of certainty for privately funded infrastructure projects by securing the future availability of losses and protecting the value of those losses against inflation. These reforms are likely to translate into benefits that can be reliably reflected in modelling exercises undertaken in assessing the viability of privately funded infrastructure projects.
Moore Stephens sees this as a long overdue reform that will encourage investment into much needed infrastructure of national significance. The discussion paper provides interested parties with an opportunity to comment on the design and implementation details of the proposal by December 9. Interested clients are encouraged to contact their Moore Stephens advisor if they wish to participate in the consultation process.
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