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Are Investment Tax Breaks Effective? Australian Evidence

Author

Listed:
  • Nu Nu Win

    (Australian National University)

  • Jonathan Hambur

    (Reserve Bank of Australia)

  • Robert Breunig

    (Crawford School of Public Policy, Australian National University)

Abstract

Using Australian tax and survey data, we exploit discrete eligibility cut-offs to estimate the effect of several business investment tax breaks, including tax credits and instant asset write-offs, implemented over the past 15 years. Policies implemented during the global financial crisis increased investment. Responses are larger for unincorporated businesses, possibly reflecting reduced efficacy of investment stimulus under Australia's dividend imputation system. However, we find mostly no evidence of an effect for other investment policies, including those implemented to address the COVID-19 pandemic.

Suggested Citation

  • Nu Nu Win & Jonathan Hambur & Robert Breunig, 2025. "Are Investment Tax Breaks Effective? Australian Evidence," RBA Research Discussion Papers rdp2025-01, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2025-01
    DOI: 10.47688/rdp2025-01
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    More about this item

    Keywords

    investment; tax incentives;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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