The job is still ahead of us
Years of government investment in tax reform, including the Henry Tax Review, has resulted in little outcome, according the Institute of Public Accountants (IPA).
"The one tangible outcome from the Tax Summit was the loss carry-back initiative which is now to be scrapped after a short one year life-span," said IPA chief executive officer, Andrew Conway.
Its proposed removal is part of the repeal of the Minerals Resource Rent Tax.
The IPA has long advocated for this initiative and we are very supportive of such a measure as part of our tax loss rules. Adoption of the loss carry back measure brought Australia into line with overseas jurisdictions and its removal is a step backwards especially when it has been recommended by the Henry Review.
"While the loss carry-back initiative provided benefit only to a limited number of small businesses, it did so when financial relief was needed the most. The loss carry back changes are mainly intended to give small businesses a boost when they need it the most through more timely tax loss relief.
"Small businesses operating through companies may experience financial problems as the current treatment of losses restricts business cash flow. They generally have limited resources to cope with adverse trading conditions and may require short-term liquidity to meet day-to-day liabilities.
"This had been the major shortcoming of the tax loss treatment rules for small corporate businesses; the inability to claw back previously paid taxes and having to wait to earn profits before they could recoup their tax losses.
"Now, the one tax reform measure to get off the ground is destined to be scrapped so the job is still ahead of us to deliver true tax reform that removes inefficiencies in the tax system and delivers tangible benefit that supports the future health and wellbeing of Australia's small business sector," said Mr Conway.