PM Transcripts

FOR PRESS: PM Nio. 7/ 1971
SUSPENSION OF INVESTMENT ALLOWANCE OW PLANT
AND EQUIPMENT usED IN MANUFACTURING
Statement by the Prime Minister, _ Mr. 12! ha GrtoIn
Parliament will shortly be asked to approve legislation suspending,
as from today, the investment allowance on manufacturing plant and equipment.
The income tax law at present permits a special deduction of 20 per*
cent of capital expenditure on new plant and equipment used in manufacturing the
dedIuction being made from the income of the year in which the plant is first used
or installed for use. This investment allowance is supplementary to the normal
deductions for depreciation; over the scheduled life of the plant or equipment it
results in total deducations for taxation purposes of 120 per cent of the installed
co. 9t of the plant and equipment concerned.
The investment allowance for manufacturing was a concession introduced
in February 1962 at a time of declining employment and slow economic activity.
It was one of a series of measures designed to stimulate demand and it was
particularly directed to encouraging expenditure on equipment and re-equipment
of manufacturing industries,, then at a low ebb. The allowance was extended in
1963 to plant and equipment used in primary production.
In current economic circumstances, with heavy private investment in
non-farm plant and equipment rising at a rate in excess of 20 per cent, it is
inappropriate to continue this special incentive for investment in manufacturing
plant and equipment. Accordingly, the Government has decided to suspend as from
today the operation of section 62AA of the Income Tax Assessment Act which provides
the investment allowance on manufacturing plant and equipment. The decision will
not a-fect the allowance for plant and equipment used in primary production, which
will still apply. The legislation will include some provisions of a transitional nature to
cover plant acquisitions straddling the suspension date. The Government feels
that some transitional provisions should be included to cover expenditure on plant
where the contract for the supply of the plant was entered into on or before today.
Details of the transitional arrangements will be announced later.
CANBERRA 3 February 1971