Australian Liberals Propose Tax-Efficient Bonds

by Mary Swire, Tax-News.com, Hong Kong

19 August 2010

Andrew Robb, the Australian opposition’s finance and debt reduction spokesman, has disclosed that, if elected, a Coalition government would develop a programme to finance infrastructure projects through private investment encouraged by tax incentives.

He said that Infrastructure Australia, which has had the purpose since 2008 to develop a strategy for the country's future infrastructure needs in partnership with the states, local governments and the private sector, would be given the opportunity to develop a 15-year programme for infrastructure, reviewable every five years.

An integral part of the finance for infrastructure projects in, for instance, roads, railways and ports would be the issuance of bonds to private investors. Private companies winning tenders would be able to issue commercial long-term bonds, on which, although not carrying a government guarantee, 10% of the interest receivable would be tax-free.

It is believed that not only would such issuances have the effect of reducing possible increases to government debt due to spending on infrastructural projects, but also provide viable investments for, for example, superannuation funds taking advantage of the additional tax incentive.

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