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Labor’s proposed Australian Investment Guarantee could increase employment by 50,000-77,000 jobs, the McKell Institute said.
The Australian Labor Party (ALP) has announced an Australian Investment Guarantee to increase private-sector investment in projects offering high-paying jobs in the lead up to the 2019 federal election.
The Australian Investment Guarantee will be a permanent feature that would allow all businesses to deduct 20 per cent of a new eligible asset worth over $20,000.
Eligible assets would include tangible machinery, plant and equipment, and depreciating intangible assets for both upgrades of existing assets and purchases of new assets.
According to the McKell Institute, Labor's proposal would reduce the effective tax rate on new investment to less than 26 per cent. This would stimulate investment in physical capital such as mining, manufacturing and infrastructure, as well as increase investment in the services sector, the think tank said.
"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 evaluated.
It added that the Australian Investment Guarantee could create up to around 77,000 new jobs and increase average wages by up to $1,500 per annum.
The Australian Investment Guarantee would commence on 1 July 2021, Labor has said.
In April, the Coalition government lifted the instant asset write-off cap to $30,000 and extended it out until 30 June 2020.
Under the government's new legislation, medium-sized businesses with an annual turnover of less than $50 million have also been added to the scheme, reportedly covering an additional 22,000 businesses employing 1.7 million Australians.
The Institute of Public Accountants welcomed the increase in the instant asset write-off, but said it is disappointed that, in leaving the deadline at 30 June 2020, the government has ignored calls for the scheme to be made permanent.
“The increase in the instant asset write-off from $20,000 to $30,000 along with the increase in the turnover threshold from $10 million to $50 million is welcomed but we believe this should be a permanent fixture of the tax system and not just an extension through to 2020,” IPA chief executive Andrew Conway said in April.
“Every year this initiative, a signature policy recommendation of the IPA, is a dangling carrot come the federal budget. It needs to be permanent to give small business certainty in making reinvestment in their business decisions.”