Research Discussion Paper – RDP 2025-01 Are Investment Tax Breaks Effective? Australian Evidence

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.