Tax group backs down on depreciation proposal

Business Tax Working Group junks proposal to change depreciation arrangements for trucks and trailers

October 25, 2012

The Business Tax Working Group has backed down from its previously proposed tax changes, including altering depreciation arrangements for trucks and trailers.

Set up by Treasurer Wayne Swan, the working group was tasked with recommending measures to offset a reduction of the company tax rate from 30 to 25 percent.

It previously supported an increase to the statutory effective life caps on trucks and trailers to save $205 million over four years, but its final draft report has now concluded it cannot recommend a package of business tax savings to fund a company tax rate cut.

The Australian Trucking Association raised concerns about the proposal in September, claiming it would lead to cash flow problems for operators and make it harder for them to upgrade to new, cleaner trucks.

Under the proposal, trucking businesses would have been required to depreciate trucks and trailers over 15 years rather than 7.5 years for trucks and 10 years for trailers, unless they self assessed their effective lives.

ATA CEO St Clair says the working group should now finish its work on company tax by lodging a final report with the Federal Government in the same terms as the draft.

"The working group’s draft report recognises the difficulty of achieving savings in the business tax system, and concedes that its proposals would have significantly affected some businesses," he says.

"In the trucking industry’s case, the proposal to remove the statutory effective life caps would have imposed a cash flow burden on businesses amounting to $4,163 per year for each typical prime mover."

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