Businesses to be allowed to carry-back losses

From 1 July 2012, the Government will provide further tax relief for companies that report a loss through the introduction of a loss carry-back initiative to help businesses facing pressures in our patchwork economy and encourage them to invest and grow.

Currently, businesses are able to carry forward their tax losses to offset future profits and reduce future tax liabilities. The proposed changes would "allow businesses to 'carry back' their losses, to offset past profits and get a refund of tax previously paid on that profit".

In doing so, this reform will mean businesses can use their tax losses now - when they need to - rather than in the future when their businesses are performing better. The carry-back will be available to companies and entities that are taxed like companies and incur losses from 2012-13.

As part of the 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 2 years earlier.