Spreading The Benefits

Posted on Oct 10, 2012 | 0 comments

Spreading the benefits of the boom – company loss carry-back

(Draft Legislation Only)

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In the 2012-13 Federal Budget the government announced its intention to provide tax relief for companies by allowing them to carry-back tax losses so they receive a refund against tax previously paid.

A one-year loss carry-back will apply in 2012-13, where tax losses incurred in that year can be carried back and offset against tax paid in 2011-12. For 2013-14 and later years, tax losses can be carried back and offset against tax paid up to two years earlier.

Loss carry-back will:

•             be available to companies and entities taxed like companies who elect to carry-back losses

•             be capped at $1 million of losses per year

•             apply to revenue losses only

•             be limited to the company’s franking account balance.

The exposure draft legislation and explanatory materials were been prepared following consultation on the discussion paper, Improving Access to Company Losses.

“Allowing carry-back will encourage businesses to invest and adapt, and will mean companies in the slow lane can use their tax losses now – when they need to – rather than in the future when their businesses are performing better,” said Mr Bradbury (Assistant Treasurer).

“As part of loss carry-back, from 1 July 2012, companies will be able to carry back up to $1 million worth of losses to get a refund of tax paid in the previous year. From 1 July 2013, companies will be able to carry back up to $1 million worth of losses against tax paid up to two years earlier.

“In its first 4 years, it is estimated that this major tax reform will provide much-needed assistance to nearly 110,000 companies adapting to the challenges of an economy in transition, helping them ride out difficult times and invest for the future, helping to boost their productivity.”

The exposure draft legislation released includes a minor amendment to the definition of ‘tax benefit’ in the general anti-avoidance rule known as Part IVA so it can apply to loss carry-back in the same way as it can for all other deductions. It also includes integrity rules that mirror the rules used for the carrying forward of losses to set out how the rules are proposed to work for loss carry-back.

JWA will keep you posted on further developments.

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