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Tax breaks to fast-track big building projects


Treasurer Josh Frydenberg. Picture: Kym Smith

• EXCLUSIVE
  SIMON BENSON
  NATIONAL AFFAIRS EDITOR
  
• 12:00AM NOVEMBER 14, 2019
• 151 COMMENTS

Tax incentives to drive billions of dollars in foreign capital for nation-building infrastructure will be granted for projects worth more than $500m in a move by the Morrison government to inject further stimulus into the economy.
A Treasury paper — obtained by The Australian and to be released on Thursday — will set a 15 per cent concessional rate for projects that qualify, including energy, transport, water and communications, as the government seeks to leverage the global capital market.
READ MORE: Our federation functions well, but we can do better, writes Josh Frydenberg | Newspoll — voters put economic faith in Coalition | Frydenberg — ‘we’ll stay the course’
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The move comes as Josh Frydenberg launches a defence of the government’s economic plan, outlining the case for safeguarding the surplus and rejecting increasing calls, including from the Reserve Bank, for direct fiscal intervention in the economy.
“If we were to respond to every call from every corner for increased spending we would not be in a position to pay down the debt we inherited, to have the flexibility to respond to future shocks and to provide the stability and certainty that households and businesses need to continue to consume and invest,” the Treasurer will say in a speech on Thursday, extracts of which have been provided to The Australian.

Treasurer Josh Frydenberg and former prime minister John Howard. Picture: AAP
“The stability and certainty in policy settings gives people the confidence to plan for the future. They can do so in the knowledge that the government will not be forced to impose punitive taxes or dramatically cut funding for essential services.”
The tax incentive for qualifying infrastructure projects, to be approved by the Treasurer, could provide billions of dollars of new investment to help turbocharge the government’s $100bn infrastructure program.
The measure would provide an exemption for specific infrastructure projects from a $360m tax integrity measure introduced in last year’s budget that doubled the 15 per cent concessional rate to 30 per cent for foreign managed investment trusts used by overseas investors to game the system, primarily in the property sector.
The move to reassert the government’s economic plan follows an exclusive Newspoll for The Australian, published on Tuesday, that showed 52 per cent of Australians were anxious about the state of the economy.
Although most voters said they believed the government was doing a good job of managing the economy, the poll suggested there was concern in the community.

Delivering the Sir John Downer oration in Adelaide, the Treasurer will say that the government is focused on ensuring the integrity of the budget in the event of any future economic shocks.
He will also call for new federalism based on a productivity drive with state and territory governments on supply-side reforms, while warning that there is no longer a big pot of federal money to hand around.
“Both the federal and state governments share responsibility for funding essential services, with the states having primary responsibility for service delivery,” Mr Frydenberg will say.
He will say that while progress has been made on funding agreements, under which 45 per cent of all state revenue is provided by the commonwealth, “we should be under no illusions about the inefficiencies that exist in our federation and the handbrake it represents on our productivity”.
“This is where we can and must do better, knowing full well that a new bucket of money will not make our economy more efficient or businesses more productive,” Mr Frydenberg will say.
He will say that the budget surplus is non-negotiable.

Treasurer Josh Frydenberg and Prime Minister Scott Morrison get their heads together during Question Time. Picture: AAP
“A strong fiscal position is about ensuring Australians do not bear an unsustainable tax burden, keeping taxes as a share of GDP well within the 23.9 per cent cap,” he will say.
“Most importantly, it is about ensuring that we can guarantee the essential services that Australians rely on while also putting the budget on a sustainable trajectory for future generations.”
Mr Frydenberg will say that, against rising global debt levels and central bank calls for quantitative easing, the Australian economy was proving to be “remarkably resilient”.
“We have supportive monetary policy settings, a strong fiscal position and are living within our means,” he will say.
“Treasury has estimated that the government’s personal income tax plan will boost aggregate household disposable income by around $8bn each year for the next four years.
“The government has worked hard to rebuild the nation’s finances. In 2013-14, some five years after the global financial crisis, the budget deficit was still the second-highest in Australia’s history. Since then, the government has made steady progress to repair the budget and chart a responsible path back to balance.

Josh Frydenberg

✔@JoshFrydenberg
· Nov 8, 2019

RBA today says “global economy has slowed” & “drought conditions continue to weigh heavily on the farm sector” but the housing market “turnaround has come sooner & faster” than expected while “employment has continued to expand noticeably faster than population growth”.

Josh Frydenberg

✔@JoshFrydenberg

RBA expecting GDP growth to increase to 2.75% in 2020/21 & unemployment to fall further. Now is the time to stay the course & not make knee jerk decisions as we saw under Labor with overpriced school halls, pink batts and $240 billion of accumulated deficits.

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12:16 PM - Nov 8, 2019
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“In 2018-19, the commonwealth budget returned to balance for the first time in 11 years.
“The 2018-19 final budget outcome showed that we have kept spending as a share of GDP at 24.6 per cent of GDP. This is below the long-run average of 24.7 per cent for the second consecutive year, while also providing record levels of investment in essential services like hospitals, schools and aged care.
“These results come down to responsible fiscal management.”
The Treasury tax paper will be released for consultation on Thursday.
“The application of this tax rate will apply to projects that are in the national interest and significantly enhance the long-term productive capacity of the economy,” Mr Frydenberg will say.
“This tax incentive maintains Australia’s competitiveness in a global market where