Australia: Company tax loss carry back: draft legislation released by the Australian Government

On 23 August 2012 the Australian Government released for consultation draft legislation that will provide tax relief for companies (and entities taxed like companies) by allowing them to “carry-back” revenue tax losses so they receive a refund against tax previously paid, as follows: 

• For 2012/13 – tax losses incurred in 2012/13 can be carried back and oset against tax paid in respect of the 2011/12 year only; and 
• For 2013/14 and later years – tax losses can be carried back and oset against tax paid up to two years earlier.

Companies will be able to carry-backup to AUD $1 million of revenue tax losses each year, providing a cash benet of up to AUD $300,000 a year (i.e. AUD $1 million x 30% company tax rate). 

The measures will be subject to integrity rules, and limited to a company’s franking account balance. 

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

According to the Australian Government, tax loss carry back received strong and widespread support at the Government’s Tax Forum last year and was developed in close consultation with business representatives and tax experts. 

The Assistant Treasurer, The Hon David Bradbury MP, stated “Allowing tax loss carry-back will encourage businesses to invest and adapt, and will mean companies can use their tax losses now, when they need to, rather than in the future when their businesses are performing better”. 

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

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