FED:Tax breaks promised for building bonds

AAP General News (Australia)
08-17-2010
FED:Tax breaks promised for building bonds

By Stephen Johnson

CANBERRA, Aug 17 AAP - The coalition has promised to give investors a tax break for
buying infrastructure bonds, taking inspiration from a Keating government policy of the
early 1990s.

Under the opposition's proposal, companies wishing to build a major project approved
by Infrastructure Australia would issue corporate bonds to fund their borrowing.

Investors who lent money to these firms by buying an infrastructure bond would be able
to claim a tax break on any interest earned.

An investor who received a 10 per cent return on a 10-year $1,000 bond would receive
a $100 tax rebate every year for the next decade.

Opposition treasury spokesman Joe Hockey said the tax rebate for investors would be
capped at $150 million a year.

"It's not the government borrowing money, it's the private sector borrowing money,"

he told Sky News.

"It gives, particularly, people at home, superannuants, investors, the opportunity
to get a better return on some infrastructure that they're investing in."

But Treasurer Wayne Swan dismissed the infrastructure bonds policy as an "unfunded
thought bubble" even though it borrows a Labor idea from 1992.

The Keating government sold infrastructure bonds to investors and superannuation funds,
but Mr Hockey said this approach two decades ago was heavily abused for tax purposes.

Mr Hockey said the coalition's plan would reduce the cost of capital for major infrastructure
projects.

"The infrastructure projects out there, that are on the margins of profitability, because
of the cost of capital now, all of a sudden it makes the money that they can borrow much
cheaper," he said.

"It means the projects are more likely to go ahead."

Infrastructure Partnerships Australia, the peak body for major building projects, backed
the coalition's tax break proposal.

"We need to focus on a whole range of options to raise capital to deliver some of these
projects," executive director Brendan Lyon told Sky News.

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KEYWORD: POLL10 BONDS WRAP

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