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

U of Melbourne Legal Studies Research Paper No. 320

43 Pages Posted: 3 Apr 2008 Last revised: 10 Apr 2008

See all articles by Miranda Stewart

Miranda Stewart

University of Melbourne - Law School; Australian National University (ANU) - Crawford School of Public Policy

Abstract

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

Stewart, Miranda, 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, U of Melbourne Legal Studies Research Paper No. 320, Available at SSRN: https://ssrn.com/abstract=1116102

Miranda Stewart (Contact Author)

University of Melbourne - Law School ( email )

Melbourne, Victoria 3010
Australia
+61 3 8344 6544 (Phone)

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia

HOME PAGE: http://https://crawford.anu.edu.au/people/academic/miranda-stewart

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