Over 110,000 Australian companies are closer to benefitting from new tax breaks after legislation for a loss carry-back initiative passed the House of Representatives last night, despite the Coalition refusing to support it.
The Gillard Government's loss carry-back initiative allows businesses in a loss position to use their legitimate tax deductions to refund tax paid in previous years.
Treasury estimates that loss carry-back will assist nearly 110,000 companies in its first four years, including one in six manufacturing companies and almost 100,000 small businesses.
Currently, businesses are able to carry forward their tax losses to offset future profits and reduce future tax liabilities.
This new initiative will allow businesses to also '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.
It encourages more innovation for new businesses and assists those businesses struggling with the challenges of an economy in transition, helping them ride out difficult times and invest for the future.
This is an important reform to the company tax system that was recommended by the Australia's Future Tax System (Henry) review.
Loss carry-back had widespread support at the Government's successful Tax Forum in 2011 and was developed in close consultation with business representatives and tax experts through the Business Tax Working Group.
The Coalition, on the other hand, voted to remove this important tax break. Even though key Opposition MPs like Malcolm Turnbull earlier praised loss carry-back, saying in 2010 that it is a 'worthwhile reform...'[that ]…is available in other comparable international jurisdictions and could hardly be politically controversial', the Coalition now wants to cut business tax breaks.
Despite their rhetoric, Mr Abbott and the Coalition are no friends of business.
Under an Abbott Government, 110,000 small businesses would lose tax breaks like loss carry-back and 3.2 million small businesses would lose eligibility for the instant asset tax write-off. On top of this some of Australia's most successful business would face a higher company tax bill to pay for Mr Abbott's expensive and irresponsible paid parental leave scheme.
This week, the Government also introduced legislation that will provide a tax incentive for private investment in nationally significant infrastructure projects. Examples of projects that could benefit include the Brisbane Cross River Rail, Sydney Motorways and the Melbourne Metro mega projects.
The Gillard Government is continuing to deliver on reforms like these to ensure Australia's tax system encourages investment and innovation so Australian businesses can benefit in the Asian Century.