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Thursday, 4 October 1984
Page: 1205


Senator ROBERT RAY —My question is to the Minister for Industry and Commerce. To what extent will business be stimulated by changes to group taxation and depreciation allowances? Which particular areas of business will benefit most from these changes? Will there be any significant loss to revenue from these measures? If so, how much?


Senator BUTTON —The Government made a number of changes to the business taxation regime in the recent Budget. The purpose of that was to provide a boost, as it were, to business initiative and to help business to grow. The particular proposal to which Senator Ray referred relating to group taxation is regarded by the Government as an important and overdue reform. It removes an artificial and unnecessary impediment to business risk-taking and operating flexibility. Previously, groups of companies could achieve this effect only by complicated and costly manoeuvring. This proposal means that group taxation will be available for 100 per cent commonly owned companies from 1984-85. We believe this will help with a necessary process of industry restructuring and investment by companies in new subsidiaries. The need will be removed for complicated business arrangements to spread legitimately common losses among members of a company group. In essence, the effect is that companies will be able to take more high risk activities through a subsidiary company, knowing that if losses are incurred they will be able to be written off against the taxation of the whole group.

Senator Ray asked me for an estimate of the cost to revenue of that. That is very difficult to estimate. The Fraser Government when it was considering this matter in 1981 or 1982 had an estimate of $200m as the cost to revenue. It is very difficult to ascertain whether that is a correct figure. At that time Broken Hill Proprietary Co Ltd was a company which was expected to enjoy considerable benefits from the introduction of group tax. Since then it has made a number of arrangements which may mean that it no longer wishes to avail itself of group taxation. Other companies will. The precise cost is difficult to estimate.

A number of other business taxation matters were dealt with in the Budget. I suppose the most important is the introduction of new arrangements for depreciation on industrial buildings. That new regime will apply on all buildings on which construction commences after Budget night. Effectively, buildings can now be written off over 25 years rather than 40 years, as was the case previously. We believe that removes a significant impediment to industry rationalisation and to investment.

Another business taxation measure in the Budget was the extension of the investment allowance provision relating to the time at which an investment had to be in place, on the ground, as it were. That has been extended from 1986 to 1987. It is believed that all these matters will help stimulate investment and continue the process of economic growth which has characterised this Government' s period in office and which we believe will continue to do so.