Tax treatment of losses

The Treasurer, Wayne Swan, has released the Business Tax Working Group’s interim report on the tax treatment of losses. The report sets out four reform elements:

  • replacing the integrity rules restricting access to losses
  • allowing immediate loss refundability
  • allowing losses to be carried back and offset against previous years’ profits
  • allowing losses carried forward to be uplifted by a determined benchmark rate.

The Interim Report says the bias derives from the way Australia allows for tax deductions of losses, which it says can become “trapped” and unavailable as a tax relief vehicle for entrepreneurs. “In some regards,” the Interim report says, “trapped losses represent a windfall gain for governments.” Current treatment of losses also makes cashflow management cumbersome.


The final report on the tax treatment of losses is expected in March 2012.