As part of its new Federal Budget, the Gillard government has announced a loss carry-back initiative that it says will help SMEs facing economic pressures and encourage them to invest in their business.
While the new budget has certainly been met with some criticism from business, the government has moved to put a positive spin on it for SMEs through both the loss carry-back initiative and the recently announced $6,500 instant asset write off plan.
A recommendation from Australia’s Future Tax System review, the loss carry-back scheme will allow businesses to ‘carry back’ their losses to offset past profits and get a refund of tax previously paid on that profit. Currently, businesses are only able to carry forward their tax losses to offset future profits and reduce future tax liabilities. As part of the initiative, from July 1 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. And from July 1 2013, companies will be able to carry back up to $1 million worth of losses against tax paid up to two years earlier.
The government says the loss carry-back scheme will give businesses greater access to their legitimate tax deductions when they are making losses.
“The introduction of the loss carry-back will encourage companies to adapt to changing economic conditions and take advantage of new opportunities through investment,” a government press release stated. “It will help struggling companies adjust to the challenges and opportunities of the patchwork economy by improving cash flows and reduce disincentives for businesses to take sensible risks.”
A full analysis on the loss carry-back initiative, as well as the new Federal Budget in general and what it means for SMEs, will be provided in our June print issue.
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