The Treasurer on Fri 13.4.2012, released the Business Tax Working Group’s final report on the tax treatment of losses which has recommended a loss carry back regime.
The Working Group said a loss carry back could be implemented consistent with a model that:
- is limited to companies;
- provides a 2-year loss carry back period on an ongoing basis;
- limits the amount of losses that can be carried back by applying a cap of not less than $1m;
- limits the amount of refunds to a company’s franking account balance; and
- is phased in from 2013-14 with an initial 1-year carry back period.
The Working Group noted that although a quantitative cap of not less than $1m may limit its effectiveness, it said it would target the reform to small and medium sized businesses and help to contain the cost to revenue over the longer term.
The Working Group was also of the view that there would be significant complexity associated with extending loss carry back to trusts.
In compliance with its terms of reference, the Working Group has also identified potential savings options from the business tax system to offset the cost of the proposed reform. However, the Working Group noted the “tight timeframe” for which to identify such savings and recommended that further analysis and consultation be undertaken before a decision is made to implement them.
The Working Group has also recommended, as a matter of priority, that the Government undertake further analysis with a view to developing a model for reforming the same business test (SBT).
Mr Swan noted the report is the first of 2 reports, with the second report focusing on longer-term reforms for the business tax system to be due to the Government by the end of 2012. Some of the issues flagged by the Working Group include “a further corporate tax rate cut or a move towards a business expenditure tax system”.
Source: Treasurer’s press release No 020, 13 April 2012
[LTN 70, 13/4]