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A hidden tax cost for infrastructure projects

Published on 01 Dec 14 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

Infrastructure assets are sometimes constructed by private sector entities which then pass ownership of the assets to government trading enterprises, which are typically responsible for operating, maintaining and controlling the assets. Conversely, the private sector may have ownership of an asset which has been financed by funds contributed by the government. Passing ownership of an asset for no consideration may give rise to substantial hidden costs resulting from the application of certain tax laws which seek to tax “benefi ts” where no cash consideration is exchanged.

This article considers a critical tax issue for recipients of gifted assets, in particular, the possibility of an unfunded tax liability pursuant to the non-cash business benefit provisions outlined in s 21A of the Income Tax Assessment Act 1936. The question of qualifying for capital allowance deductions is also an area of uncertainty.

Author profiles:

Charles Ferraro
Charles is a Manager with PricewaterhouseCoopers. Current at 10 December 2014
 
Paul NAGLAN

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