The Federal Government has released a
discussion paper in which it proposes to change the carried
forward loss rules for infrastructure projects.
The main changes are:
to remove the continuity of ownership test and same business
test for entities conducting infrastructure projects
to allow entities conducting infrastructure projects to uplift
the value of their carried forward losses by the 10 year government
The changes, if implemented, will be a welcome boost to
Historically, the carried forward loss tests have been
problematic for entities conducting infrastructure projects
particularly the strictly applied same business test.
The proposal to index losses and therefore maintain their real
value recognises the long lead time that many infrastructure
projects have before they turn tax positive.
To be eligible for the tax concessions a project must be a
designated infrastructure project. A designated infrastructure
project is a project included on Infrastructure Australia's
National Priority List, that is "ready to proceed" and
has been approved. To be included on the list, projects must
involve capital expenditure of over A$100 million or be a regional
infrastructure fund project, a flagship project or a project that
demonstrates unique national interest qualities.
In approving projects Infrastructure Australia will consider the
the ratio of economic benefits to economic costs
the corporate governance arrangements in place
the availability of the project to multiple users
the benefit to the broader community.
The scheme is capped at A$25 billion. Projects that meet the
criteria will be approved on a first-come first-served basis until
the cap is reached.
Treasury has invited comments on the discussion paper.
Submissions must be received by 9 December 2011.
In considering the implications of the proposal, clients must
consider the following:
for major companies already undertaking a range of revenue
earning activities, the proposed changes will only apply if the
infrastructure project is set up in a wholly owned subsidiary or a
separate trust structure
the inclusion of a project on the National Priority List can
only be done where a project is of national significance and a
submission by a project proponent that its project is of national
significance may raise the likelihood that the infrastructure
facility could be declared under the third party access regime in
Part IIIA of the Competition and Consumer Act
Special Purpose Vehicles for carrying out infrastructure
investments are more likely to be able to take advantage of the
proposed rules and may be desirable where there is a likelihood
that interests in the SPV may change
in light of the A$25 billion cap, clients should consider now
whether their project is listed on the National Priority List and,
if not, whether an application should be made.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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