Snippets May 2025

The Big and the Beautiful

Over the past few months President Donald Trump’s “One Big Beautiful Bill Act” received quite a bit of attention before it was passed on 4 July 2025 - but why the fuss.

The key business facing elements included:

  • 100% first-year deduction for U.S. spending on factories, data-centre hardware and other “qualified production property,” plus a 35% credit for domestic semiconductor fabrication.

  • Permanent R&D expensing and a higher cap that lets smaller firms write off more equipment immediately.

  • Temporary deductions for tip and overtime income, an enlarged Child Tax Credit, and optional tax-advantaged “Trump Accounts” families may open at a child’s birth.

  • Before the bill, companies could deduct interest only up to 30% of EBIT; after enactment they may deduct up to 30% of EBITDA, restoring a larger allowance.

  • Eliminates the end-2025 sunset for the lower individual tax brackets, while leaving the already-permanent 21% corporate rate unchanged.

The legislation also adds roughly US$150 billion for defence modernisation and US$75 billion for border security and immigration enforcement.

The favourable capital related deductions may steer multinational manufacturing, AI infrastructure and chip-fabrication projects toward America, potentially altering supply-chain geography and competition over the next decade.

A good PIE

A Portfolio Investment Entity (PIE) is a type of investment vehicle that is able to pay tax on behalf of its investors, and depending on the ‘prescribed investor rate’ chosen, the tax liability on the income is able to be capped at 28%. This can be a material benefit to investing in a PIE - depending on the circumstances of a specific investor.

When the top personal marginal tax rate increased to 39% and the income tax rate for trusts subsequently increased to 39%, there was a natural expectation that the income tax rate for PIEs would also increase. It became a common topic of conversation.

To date, there has been no indication that the top tax rate applying to investors in PIEs will change and hence investments into PIEs continue to receive a comparative tax benefit of potentially 11%, being the difference between the capped rate of 28% and the top rates of 39%. That has also given rise to an increase in the number of banks and fund managers that provide PIE investment products.

It is worth bearing this in mind the next time consideration is being given to making a passive investment and comparing the post-tax yields between the various options.