The Productivity Commission will recommend the federal government offer a more generous immediate tax deduction for new investment by companies as a way of boosting non-mining business spending, which has declined over the past 15 years.

To incentivise new business investment, the commission will this week advise Treasurer Jim Chalmers to move towards a corporate cash flow tax model, enabling companies to receive a larger upfront tax deduction for capital outlays, sources familiar with the commission’s thinking and who were not authorised to speak publicly told The Australian Financial Review.