The Australian Investment Guarantee is one of the Labor Party’s core policies. It allows businesses to deduct 20 per cent of any new asset they purchase, subject to availability, if it’s worth more than $20,000. It’s proposed to commence on 1 July 2021 and will be a permanent feature of the tax system.
According to the McKell Institute, this would reduce the effective tax rate on new investment to 26 per cent.
“The advantage of accelerated depreciation is that companies cannot benefit from the incentive unless they invest. Further, it rewards only new capital, as returns from existing capital investments remain taxed at the same rate. Accelerated depreciation can also encourage the adoption of new capital with the latest technologies and increased productive capacity,” the think tank said.
What this means for jobs and wages
“Unlike most investment allowances, which typically are temporary in nature, the Australian Investment Guarantee would be ongoing, providing a permanent lift in investment incorporating the most modern technologies,” the McKell Institute said.
As such, with this and other factors considered, the McKell Institute estimates that the Australian Investment Guarantee could increase employment by 50,000 to 77,000 jobs.
Further, the think tank also believes that the measures will increase Australian wages on average by up to $1,500 per annum.