Business to "Carry Back" Losses

UPDATE Dec 2013 - The Coalition Government intends dropping this proposal of tax changes and is therefor now not applicable.

At the moment, businesses that incur current year losses can only carry those losses forward to write off against future income and profits.

Under the new "carry Back" losses scheme, businesses will be able to claim losses of up to $1 million against tax they have paid in the previous two years. For example, a business claiming the full amount would get a refund cheque of $300,000 - ie company tax rate of 30¢ in the dollar.

To be eligible to use the new "Carry Back" losses, a business has to have made a profit previously and then a loss from 1 July this year in order to be eligible for loss carry-back provisions. The Government’s estimate is that up to 110,000 loss-making small businesses over a four-year period will be eligible.

But, the new "Carry Back" provisions do not apply to all business structures. The new provisions only apply to businesses structured as a company and DOES NOT apply to sole trader, partnership, and trust business structures. This means that many small businesses will not be eligible to make the claim.

It is estimated that of the 2.8 million small businesses, only 20% are structured as a company, the rest are partnerships, sole traders and trusts.

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