• Service: Tax, Corporate Tax, Topics, Infrastructure
  • Industry: Real Estate & Construction
  • Type: Business and industry issue, Regulatory update
  • Date: 24/04/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Peter Mallyon

Peter Mallyon
Director, Tax

+61 2 9335 7562

Special purpose vehicles drive DIP investment 

by Peter Mallyon, Financial Services Specialist

The government's proposed Tax Loss Incentive for Designated Infrastructure Projects is designed to encourage private sector investment in Designated Infrastructure Projects (DIP). Infrastructure projects often experience long lead times between incurring deductible expenditure and the derivation of assessable income when the project becomes operational. This long lead time can reduce the value of the losses to the taxpayer. As such, the uplift in the value of carry forward losses proposed in the ED is welcome.

However, in order to be eligible for the loss concessions, the taxpayer must be a standalone special purpose vehicle (SPV). That is, it cannot be a company or trust that is a member of a tax consolidated group.

Whilst the requirement for an SPV may reflect industry practice and may be suitable for joint venture investors, it may place impediments on large Australian groups from accessing the concessions if they enter into infrastructure projects as a sole investor.

The ED notes that if the entity was to carry on other activities, it would be necessary to quarantine the DIP business from other businesses within the entity or group and that this “would create a great deal of complexity…particularly if one project stopped being a DIP”. This ‘complexity’ and ‘risk’ however may not be very different from the issues faced by flow through trusts carrying on multiple ‘eligible investment businesses’.

Submissions on the ED are due by 30 April 2013.


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