11 March 1996 - 3 December 2007
GOVERNMENT DECIDES AGAINST THE TAX VALUE METHOD
The Treasurer announced today that the Government has accepted a recommendation
from the Board of Taxation not to proceed with the Tax Value Method (TVM) and
the associated Section 4 'core rules'.
TVM was recommended by the Review of Business Taxation and referred by the
Government to the Board of Taxation in August 2000 for consultation and advice.
The Board has reported there is significant industry concern about the cost
and uncertainty associated with the TVM. In particular, the Board found that
there is a widespread perception that, while the TVM may offer benefits in some
areas, it would generate greater complexity and uncertainty in others. There
is also concern that adopting the TVM would result in substantial transitional
costs for tax advisers and business generally.
The Board's recommendation followed an extensive evaluation of the TVM, which
included a wide-ranging process of consultation with tax experts, business and
the broader community.
While the TVM concept will not be pursued, the Government will develop, in
consultation with the business community, a systematic tax treatment of rights
and blackhole expenditures, with a view to implementing these changes by July
2005. Until then, the Government will continue to accord appropriate recognition
of rights and blackhole expenditures on a case-by-case basis as re-affirmed
by the Minister for Revenue and Assistant Treasurer on 14 May 2002 (Maintaining
the Momentum of Business Tax Reform).
While much has already been done to address blackhole expenditures through
the uniform capital allowance system, some business expenditures remain unrecognised
in the tax system. Although rights are currently accorded a range of taxation
treatments, anomalous outcomes may arise where there is a gap or overlap between
The Government has already, in consultation with the business community, introduced
positive measures including thin capitalisation, consolidated taxation of corporate
groups, the uniform capital allowances system, tax relief for demergers, and
a simplified imputation system. Other ongoing areas of reform which the Government
will pursue are the review of international tax arrangements and reforms to
the taxation of financial arrangements.
The Board of Taxation was established in 2000 by the Government to ensure full and effective community consultation in the design and implementation of tax legislation. I would like to thank the Board of Taxation for its consultation on and evaluation of the TVM proposal.
28 August 2002
Contact: Niki Savva
02 6277 7340