9.1.2  General tax principles

In Australia, income tax is imposed on "assessable / taxable income" and the amount of tax payable is reduced to the extent of allowable deductions. Examples include:

•  normal business outgoings such as salaries and wages incurred in earning taxable income are deductible when the liability is incurred;

•  capital allowance deductions are calculated with reference to the effective life of a depreciating asset;

•  other expenses are deductible over statutory periods such as five years (e.g. certain finance costs like underwriting fees); and

•  immediate write-off is generally allowed for some costs such as re-instatement of the site, charitable donations etc.

Australian tax rules are very complex on both the revenue and expense accounts. The derivation of actual tax payable in any year depends on the interplay of many variables - the nature of the income; the ability to carry forward tax losses; deductions which may be influenced by various taxpayer electives (e.g. depreciation methods); thin capitalisation rules limiting interest deductions; the operation of the tax consolidation regime and so on. As a result, it is not wise to generalise on tax - it all depends.

Overlying the general principles of income tax that regulate any business operation, including PPP projects, infrastructure project sponsors are also subject to the specific anti-avoidance provisions concerning asset leasing / use / control by tax-exempts of taxpayer property (Division 250).  (Australian tax law also includes integrity measures that can apply to any transaction or part transaction - the general anti-avoidance measures embodied in Part IVA of the 1936 Act.)