Labor steals corporate tax cut thunder with write-off

Via the AFR:

In a second announcement to be made Tuesday by Bill Shorten, the Labor leader will promise to introduce an Australian Investment Guarantee in which all businesses in Australia will be able to immediately deduct 20 per cent off any new eligible asset worth more than $20,000.

The balance will be able to be depreciated in line with normal depreciation schedules after the first year.

…Labor’s scheme will be permanent and analysis by the Parliamentary Budget Office shows it will cost the budget about $1.8 billion a year.

This is straight from the Trump tax cuts agenda and is good policy and politics. It’s the tax cut you get when you are actually putting it into capital deepening.

It is also a monumental wedge for Do-nothing Malcolm Government’s $65bn brain fart alternative.

It is interesting to note that the Shorten Opposition continues to put forth policy rather than play small target politics. Between this, negative gearing, capital gains, super concession and trust reform, the tax reform platform is filling out nicely.



  1. truthisfashionable

    “Between this, negative gearing, capital gains, super concession and trust reform, the tax reform platform is filling out nicely.”

    They really need to start getting out the talking points on why and how.

    Why are they making these changes, why should I vote for these changes.
    Followed by the ‘how will it affect me’. There how is the hard part as Australians are seemingly deluded into thinking they are all part of the 1% in this country.

    • Yup. They need to sell these things, explained by different people in different ways to ensure most of the population have a grasp of why these things are a good idea, and are less easily influenced by three word and largely vacuous slogans like “toxic tax” and “JOBS AND GROWTH!!!”.

  2. While this is generally a good idea, it seems too blunt. Really big projects don’t need this as they are generally in losses in early years anyway. This will just extend that loss period and delay when those companies pay tax.

    • Yep. Any item of plant with a life of up to 10 years you can deduct 20% in the first year any way under the diminishing value method (pro rated for days in the year).

      The wording above though suggests you can deduct 20% in the first year, regardless of whether you spend it on 1 July or 30 June.

    • Here’s an extract from the policy paper:


      Under current depreciation arrangements manufacturing company A, an Australian based SME,
      is struggling to purchase a new $10 million piece of machinery that would greatly enhance its
      productivity and output allowing it to expand and create additional jobs.

      Current arrangements (without the Australian Investment Guarantee)

      Under normal depreciation rules for this piece of machinery (assuming a straight line
      depreciation method) manufacturing company A is allowed to deduct 10 per cent or $1 million
      of the $10 million in each year over the effective 10 year life of the asset. In other words, $1
      million is deducted in the first year with the remaining $9 million in equal proportions over the
      remaining 9 years. But these arrangements are not quite attractive enough to get the project off
      the ground.

      Arrangements with Labor’s Australian Investment Guarantee

      Under Labor’s Australian Investment Guarantee, manufacturing company A will be able to
      immediately expense 20% ($2 million) of its investment in the first year.
      The remaining 80% ($8 million) would then be depreciated over the effective life of the asset
      from the first year in line with the original depreciation schedule – which in this case is 10 per
      cent per year, or $800,000 of the $8 million.
      This means Manufacturing company A can write off a total of $2.8 million in the first year ($2
      million plus $800,000) of its investment (instead of $1 million under existing arrangements).
      This means the SME company has additional immediate cash flow, which tips the balance and
      triggers the positive investment decision. The company can then use the extra cash flow to bring
      forward other investments and hire new employees.

      • AlbyManglesMEMBER

        thanks, sounds good if you are purchasing something huge and using the straight line depreciation method – does any company really do that

  3. joelmpalmerMEMBER

    Quite good news for the likes of Netwealth, Praemium, Hub24 etal …. just in case anyone looking for a loophole… 🙂
    “APRA-regulated super funds will be largely unaffected because their franking credits are exhausted by the offsetting of other tax liabilities. As such they do not generate many refunds.”
    from AFR.
    Another reason people will be exiting SMSFs …

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