Company Tax Loss Carry Back: Draft Legislation

On 23 August 2012 the Australian Government released for consultation draft legislation to allow limited tax loss carry back against taxable income of prior years.

A loss carry back regime will bring the Australian tax system in line with a number of international tax systems including the United Kingdom, France, Germany, the United States and Canada.

The loss carry back will be subject to integrity rules. The Government is yet to provide details of these rules.

The draft legislation applies to companies only. It does not apply to other business structures such as partnerships, trusts and sole traders.

Subject to the passage of legislation:

• 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
• the measures apply only to revenue losses. No relief is given for capital losses
• refunds will be limited to the balance of a company’s franking account

A copy of the Exposure Draft and Explanatory Material is available from the Australian Treasury Website:

http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2012/company-losses-access-Exp-Draft