Steel, tourism sectors push for tax breaks at forum

Both industries' tax forum submissions push the idea of accelerated tax depreciation.

By InvestSMART · 3 Oct 2011

By InvestSMART ·
3 Oct 2011

Comments

Both industries' tax forum submissions push the idea of accelerated tax depreciation.

THE steel and metals sector wants all new resource and infrastructure projects worth more than $100 million to be required to use more Australian materials - and in return get tax breaks, including on the controversial minerals resource rent tax.

In its submission to this week's tax forum in Canberra, the Australian Steel Institute states that the investment boom in the resource projects is not being shared by the metals, fabrication and machinery sector. Under siege from a high Australian dollar and cheaper overseas suppliers, it argues for increased tax concessions and discounts on the minerals resource rent tax to offset increased costs of using local supplies. It also canvasses accelerated tax depreciation on major projects assets.

''We do not believe that tax reform should be used to subsidise inefficient industries ? [but] to create a level playing field where efficient Australian companies can compete during a period of artificially high exchange rates and crowding out in the non-resource industries,'' it said.

''Once an industry is dismembered, it is very difficult to put it back together again ? the business networks have been destroyed, the equipment scrapped and the skills dispersed.''

These major project owners, and their contractors would need to meet set criteria about Australian content, as a precursor to approval by bodies such as the Foreign Investment Review Board. The steel institute stated it did not propose any measures that would contravene World Trade Organisation guidelines or principles.

Another industry weathering the tempest of a high dollar is tourism, which accounts for 9 per cent of Australia's export earnings. The Tourism and Transport Forum submission also pushed the steel industry's idea of accelerated tax depreciation, this time to boost new tourism ventures and refurbish existing ones.

Tourism and Transport Forum chief executive John Lee said one of the main reasons Australians shied from domestic travel was the ''lack of investment in product and experiences''.

The current capital works depreciation regime applying to tourist accommodation, where a building was written off over 25 years, did not reflect the reality that hotels had a shorter operational life. He called for an additional 50 per cent deduction bonus as a short-term incentive for three years, with the remaining balance spread over 12.5 years.

The pleas by the steel manufacturing sector and tourism for specific tax assistance are but a few of hundreds of tax proposals being pushed by industry and community groups at the tax forum. The property and housing industry, superannuation and banking are arguing their own pitches for tax reform.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What tax changes is the Australian Steel Institute asking for at the tax forum?

The Australian Steel Institute has asked for tax concessions to help local metals, fabrication and machinery firms compete. Their submission calls for accelerated tax depreciation on major project assets, discounts or relief on the minerals resource rent tax, and incentives tied to greater use of Australian materials on new resource and infrastructure projects worth more than $100 million.

How would Australian content rules work for large resource and infrastructure projects?

The steel industry proposes that major project owners and contractors meet set Australian content criteria as a condition for approval by bodies such as the Foreign Investment Review Board. In return, qualifying projects could receive tax breaks. The submission says these measures would be designed to comply with World Trade Organization guidelines.

Why are steel and metals manufacturers pushing for tax breaks now?

Industry groups say the investment boom in resources hasn’t flowed to metals, fabrication and machinery sectors. They cite pressure from a high Australian dollar and cheaper overseas suppliers and argue targeted tax concessions would level the playing field so efficient Australian companies can compete during this period.

What tax incentives is the tourism industry proposing to boost domestic travel investment?

The Tourism and Transport Forum supports accelerated tax depreciation for new tourism ventures and refurbishments. Specifically, it has proposed a short-term 50% deduction bonus for three years, with the remaining capital allowance spread over 12.5 years, to encourage investment in product and experiences for domestic tourism.

How does the current capital works depreciation regime affect hotels and tourist accommodation?

Under the existing regime cited in the article, buildings used for tourist accommodation were written off over 25 years. Tourism industry representatives argue this doesn’t reflect shorter operational lives for many hotels and say faster depreciation or a temporary bonus would stimulate refurbishment and new developments.

Will the proposed tax measures for steel and tourism violate international trade rules?

According to the Australian Steel Institute’s submission, it did not propose measures that would contravene World Trade Organization guidelines or principles. The industry says proposed Australian content criteria and tax incentives would be structured to comply with international rules.

How significant is tourism to Australia’s export earnings, and why does that matter for tax policy?

The article notes tourism accounts for about 9% of Australia’s export earnings. Industry groups argue that given tourism’s contribution to exports, targeted tax incentives and accelerated depreciation could encourage investment in tourism infrastructure and experiences, supporting the sector amid a strong dollar and competitive pressures.

Are these tax proposals part of a larger discussion at the tax forum?

Yes. The steel and tourism submissions are among hundreds of proposals being presented by industry and community groups at the tax forum. Other sectors such as property and housing, superannuation and banking are also making their own tax reform pitches.