Rod Henderson, Energy and Natural Resources Tax Partner for global corporate advisory firm KPMG, said that tax reform fatigue has caused many executives to regard the new Uniform Capital Allowances (UCA) system as an administrative issue best left to the compliance function.

"Such action could seriously affect the company's bottom line now and in years to come.

"Every major tax change creates challenges for organisations. The UCA is no exception. The new tax system eliminates accelerated depreciation and there are many other elements that require careful and timely management at all levels in an organisation."

UCA has 40 different categories of depreciating assets and capital expenditure items.

Each has special rules and characteristics that determine the way a deduction is allowed.

For example, companies can now choose between self-assessment of the effective life of a depreciating asset and a 'safe harbour' effective life determined by the ATO. The ATO effective life is based on generic industry factors.

In the many cases the ATO's 'safe harbour' effective life will be longer than that typically used by industry, causing lower annual UCA deductions for companies.

"Instead of allowing compliance managers to accept the ATO's 'safe harbour' effective life or to make decisions about self-assessment, CEOs and CFOs need to gain a sound knowledge of the tax and become heavily involved.

"Then they will be able to factor in the effects of the UCA when planning and modelling a new mining or construction project.

"In some cases the amount of tax paid over the life of a project can have a major impact on whether the project gets the go-ahead or not.

"Another significant issue relating to UCA is that the total acquisition price of a mining venture is now potentially deductible. Therefore, it is more tax effective to acquire the direct assets rather than to buy the mining company.

"The ATO's current review of 'safe harbour' effective life for depreciating asset categories has serious financial implications," said Mr Henderson.

In the case of a power station, the ATO has increased the effective life from 20 to 30 years. This represents a 50 per cent increase and reduced annual UCA deductions.

In addition the ATO is reviewing the effective life of depreciating assets used in other industries including mining.

Following the introduction of UCA, KPMG has developed proprietary tools and methodologies for use by mining and energy executives.

"Also, we liaise with the Federal Government, the ATO, industry bodies and professional organizations in relation to effective life determinations and other topical UCA issues," said Mr Henderson.