Australia

Details

  • Service: Tax, Corporate Tax
  • Industry: Financial Services
  • Type: Regulatory update
  • Date: 7/07/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Matt Birrell

Matt Birrell
Partner, Corporate Tax

+61 3 9288 5367

mbirrell@kpmg.com.au

Privatisations: the only good thing coming out of the 90s? 

by Matt Birrell, Financial Services Specialist

The 1990’s are known for a lot of things, some of them are even good. Bill and Hilary, the Olsen Twins, Shania Twain, bike shorts. And let’s not forget Buffy. The 90’s were also known for many privatisations in Australia – particularly in Victoria. Since it’s been 20 odd years since many of us have looked at privatisations, let’s take a trip down memory lane with the key tax provisions.

Division 57 – Applies a 'rule the books' methodology to an enterprise moving from exempt to taxable status such that income / expenditure attributable to the period of Government ownership is non-assessable / non deductible.

 

Division 58 – Contains cost setting rules that limit the depreciation a purchaser obtains on a privatised asset to either a Pre Audited Book Value or a Notional Written Down value. The rules can prevent a purchaser stepping up the tax cost of an asset to market value.

 

Division 243 – Limited Recourse Debt. Applies where an asset is financed by limited recourse debt and the debt is not repaid. Essentially claws back any accelerated depreciation deductions.

 

F2 elections – long term leases. This election allows a purchaser to claim Div 43 on buildings and structural improvements previously constructed on certain leased land.

 

Division 250 – Applies to deny depreciation on assets that are put to a tax preferred use (which broadly means assets that are used or controlled by the Government).

 

Section 51AD – just for the romantics these days but worth remembering. The section applied to Government leased assets where they were financed on a non recourse basis. The section denied depreciation and interest thus making it a particularly nasty provision.

 

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