The Gillard Government’s first budget has received a mixed reaction from industry and none more so than the legal profession. One of the main points on the budget is that it doesn’t include one of the biggest issues facing the Australian business community in decades, the introduction of a carbon tax. “The two big changes facing the Australian economy are the introduction of the carbon tax and the Mineral Resources Rent Tax (MRRT) and there is not a lot about either in the budget,” said Gilbert + Tobin tax partner Peter Feros.

According to Feros, there were few significant policy changes for business announced in the budget. One of the few changes that was announced is in regards to fringe benefits tax on cars.  The statutory formula for determining the taxable value of car fringe benefits will be replaced with a single rate of 20% that applies regardless of the distance travelled, with an aim to remove the incentive for people to further drive salary sacrificed and employer sponsored cars. “This means clients will need to re-evaluate their salary packages for staff and how they use cars,” said Feros.

From a taxation point of view, there are implications for infrastructure matters. Losses generated by designated infrastructure projects will be exempt from the Continuity of Ownership Test and the Same Business Test and will be uplifted at the government bond rate. The value of any accumulated losses would be maintained by indexing them to at the government bond rate. “These amendments to the tax laws will facilitate investment in developed infrastructure in Australia,” said Norton Rose partner and energy head Vincent Dwyer.  This is to address concerns from the market that tax losses were lost when that infrastructure or asset was sold, before it started making profit.

The budget also included an extra 40% in funding for Infrastructure Australia. “One of the problems in the past with infrastructure in Australia was that there was no pipeline of certainty for foreign investors. Infrastructure Australia’s role is to give certainty to investors that they can commit to a market where there is a strong pipeline of projects,” said Dwyer. “Without that, no one will come permanently.”  Dwyer added that with more certainty for infrastructure investment, there will be increased opportunities for front-end infrastructure work and financing.