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Axing depreciation shows no appreciation for Australian aviation

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Joint Media Release

Warren Truss MP

Shadow Minister for Infrastructure and Transport

Bob Baldwin MP

Shadow Minister for Tourism and Regional Development

Axing depreciation shows no appreciation for Australian aviation

THE Gillard government’s erratic and contradictory policy lurches are on display once more, with its proposal this week to scrap 10-year accelerated depreciation for Australian airlines. Last week the government lauded itself for introducing 10-year accelerated depreciation for the shipping sector.

Apparently, it’s not enough that the carbon tax will savage Australia’s airlines, but the Gillard government is now coming after the sector to effectively pay more company tax at a time when our tourism sector is struggling.

Ironically, it will also delay, or even prevent, our airlines from upgrading fleets to bigger, more fuel efficient, environmentally-friendly and quieter aircraft. Dumping accelerated depreciation makes no sense.

Aviation, by its very nature, is a global market and Australian airlines already carry financial baggage not imposed on their competitors. While our airlines have a 10-year write-down schedule, Singapore Airlines can depreciate its aircraft in just three years. Meanwhile, Emerates and Etihad pay no tax on any aircraft transactions at all.

In government, the Coalition introduced accelerated depreciation rates in 2002 to help address this anomaly.

While the average age of Qantas aircraft is 9.6 years, its two leading competitors Emirates and Singapore boast 6.2 and 6.6 year old fleets, respectively. Any change to Australia’s tax treatment of aircraft will blow out that disparity further.

Any phase out of accelerated depreciation removes incentives to replace aircraft and will increase the average age of our fleets. This would put Qantas and Virgin Australia at a further competitive disadvantage at a time of increasing competition from overseas carriers and rising fuel costs.

And that’s on top of Qantas copping a carbon tax hit of up to $115 million in the first year alone and Virgin Australia $45 million.

The reality is our airlines are already making huge strides to become more environmentally sustainable. Earlier this week Qantas announced it will pioneer Australia’s first commercial flight using biofuel.

Meanwhile, Virgin Australia is a partner with the University of Queensland; the Renewable Oil Corporation,GE and the Future Farm Industries CRC; and Australian-based biofuel company Licella, to advance biofuel technologies.

The carbon tax is just a dead weight, making our airlines less competitive. Removing accelerated depreciation is just another anti-Australia handicap we don’t need.

From 1 July our aviation industry faces a suite of government attacks, including cutting the $6 million En-Route Subsidy to regional centers and new fees to cover airport security, as well as the carbon tax.

These measures alone are set to increase the costs of domestic air tickets.

But it doesn’t stop there. It will also send Australia’s struggling tourism sector into yet another Labor-induced tailspin.

Domestic tourism will be put at a further cost disadvantage, with the carbon tax inflicting higher prices on domestic flights, but international flights will be exempted from the carbon tax.

The Gillard government must stop introducing new ways to hurt Australian businesses that drive up costs, threaten jobs and make our industries less competitive.


Media Contacts

Truss: Brett Heffernan on (02) 6277 4482 or 0467 650 020 or Baldwin: Julian Harniman on (02) 4983 1330 or 0403 922 831 or