This study investigates the impact of the New Tax System and other factors on the capital structure of the Australian listed real estate property enterprises. Hypotheses utilising Static Trade-off, Pecking Order and Market Timing theories are empirically examined using a series of the taxes variables (i.e., effective tax rate and non-debt tax shields); firm characteristics (such as size, asset structure, profitability, growth and business operation risk); and the market timing theory-related determinants such as interest rate and Market Performance Index.
The empirical tests comparing the three examined periods namely NTS, Post-NTS1 and Post-NTS2 produced a mixed result. The positive relationships were found between the leverage and the tax factors, asset structure, size, profitability and market performance in the NTS period. Negative relationships were found between the leverage and effective tax rate, growth opportunity and business operation risk. The results in the Post-NTS1 and Post-NTS2 are almost opposite to the findings in the NTS period. The most important finding in this period is the significant impact of the interest rate. The relationship between leverage and the interest rate is positive and significant, reflecting the debt-relying policy of the real estate property enterprises. In general, the findings suggest that changes resulting from the introduction of the New Tax System are positively related to the capital structure decisions of real estate property enterprises in the 1998-2002 and 2001-2003 periods. The changes in the capital structure of the sampled enterprises in the 2004-2006 period were impacted mainly by the low interest rate. The findings generally support the static Trade-off, Pecking Order, Agency Costs and Market Timing theories of capital structure.