The Australian Taxation Office (ATO) ruled with finality on the question of asset sales tax dues for private equity firms, upholding an earlier draft decision that gains from such transactions must be subjected under the income tax provisions.

The new ruling effectively ensured of better tax revenues for the federal government as income tax provisions generally attracts higher tax assessment when compared to capital gains on asset acquisitions.

Analysts, however, agreed that the ATO ruling, which has been delayed three times, would be greeted with disappointments by the country's private equity firms, which earlier issued a collective advisory that holding off on the decision would only lead to months of uncertainties over the Australian tax policies.

Such environment, according to the private equity firms, could dissuade many private equity investors from making positive investment decisions in the Australian equity market.

The same ATO ruling also confirmed the earlier assertions of the tax office's second draft decision on the matter, which maintained that Australian tax authorities need to look deeper and possibly crackdown on offshore firms that were set up by local companies to effectively cut down their tax obligations.

That second draft argument was liberally used by the ATO in running after tax offenders, a campaign highlighted by the celebrated Paul Hogan tax case a number of months ago.

The Australian actor's case is ongoing but its criminal component was dropped last week by the Australian Crime Commission, citing that a criminal case against the Crocodile Dundee star was no longer of interest to the public.

The new development, however, renewed public attention on the tax policies of the government, with most concern being expressed by the business sector in light of the new ruling, which traces its origin from the dispute last year between the ATO and private equity firm TPG.

The ATO imposed a total of $US628 million as tax dues for TPG to service on November 2009 as the tax office had determined that the private equity firm earned some $US1.4 billion over the sale of department store Myer.