*The below is an extract from The Sydney Morning Herald
Australia is making moves to support its businesses that were drastically affected by the coronavirus pandemic. But how? On 6 October 2020, as part of the 2020–21 Budget, the government announced a loss carry-back regime to enable usually profitable businesses the opportunity to stay afloat until they turn a profit. The financial lifeline of businesses could potentially be saved through this temporary tax break scheme.
Introducing the Loss Carry-Back Policy
Under the loss carry-back policy, a firm that has paid tax on profits in previous years can claim a refund to make up for the loss that occurred due to the pandemic. It is seen as a way by tax experts to give vital cash flow to businesses that would have been profitable if not for strict lockdown and restrictions to prevent the spread of COVID-19.
Thanks to the loss carry-back provision scheme, hundreds of thousands of Australians employed by usually profitable businesses would be protected.
The loss carry-back policy has also been implemented in other parts of the world by strong nations alike. They include the United States, Britain, Germany, Austria, Japan, and New Zealand. Thus, the Morrison government has mirrored the policy to support their local businesses of all sizes and giving them the chance to claim back some of the tax paid pre-COVID to offset losses.
PwC tax partner Jonathon Malone said the advantage of loss carry-back rules was that they would support businesses that were profitable and contributing to the government’s coffers in the good times, absent a global pandemic.
“Introducing a loss carry-back provision is eminently sensible and would not take much to put in place because we’ve already done it,” he said. “We’ve done this before, we should do it again.”
Support for the Small to Medium Enterprises
The budget will also contain other measures aimed at helping the small business sector through the recession.
“Small business is the backbone of our economy. The Morrison government will continue to support our small and medium-sized businesses as part of our economic recovery plan,” Treasurer Josh Frydenberg said.
Who else is Eligible for the Loss Carry-Back scheme?
The Australian Taxation Office states that the “Eligible corporate entities with less than $5 billion turnovers in a relevant loss year can carry back losses made in the 2019–20, 2020–21 and 2021–22 financial years to a prior fiscal year’s income tax liability in the 2018–19, 2019–20 and 2020–21 financial years.”
To read more, please refer to the Sydney Morning Herald
‘Loss carry back’: The scheme to help businesses on the brink https://www.smh.com.au/politics/federal/loss-carry-back-the-scheme-to-help-businesses-on-the-brink-20201001-p5616c.html.