The Federal Government’s Business Tax Working Group is asking for submissions into how it can more effectively tax losses, in order to encourage risk-taking and remove 'a bias against risk-taking in the economy'..
Australia’s tax system “creates a bias against risk-taking in the economy” and the Federal Government is open to ideas for change that will correct the bias. The call for ideas comes in a new ‘Interim report on the tax treatment of losses’ released yesterday (December 12th) by the Federal Government’s Business Tax Working Group.
The Interim Report says the bias derives from the way Australia allows for tax deductions of losses, which it says can become “trapped” and unavailable as a tax relief vehicle for entrepreneurs. “In some regards,” the Interim report says, “trapped losses represent a windfall gain for governments.” Current treatment of losses also makes cashflow management cumbersome.
Entrepreneurs who cannot foresee favourable tax treatment for losses, the Interim Report suggests, are less likely to take risks, which hinders growth.
CPA Australia supports the government’s position, stating that “As it currently stands there is an inconsistency in the tax treatment of legitimately derived profits and that of legitimately incurred losses.”
“An effective tax treatment of businesses will be absolutely critical to Australia’s ongoing economic competitiveness,” said CPA Australia Head of Business and Investment Policy Paul Drum. “A key factor to achieving this means ensuring that business taxpayers can claim legitimate prior year losses.”
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