In the 2012/2013 income year, the loss carry back rules allowed companies to use current year tax losses to recoup tax paid in prior years. The rules meant that companies were able to ‘carry back’ up to $1m of tax losses incurred in the 2013 income year to recoup tax paid for the 2012 income year. The refundable tax offset that could be claimed was limited to the company’s franking account balance for that year.
The loss carry back rules were intended to extend to future years sothat companies could carry back losses from the current or prior year to recoup tax paid in either the previous year or the year before that.
The loss carry back rules were originally funded by the Minerals Resource Rent Tax, or mining tax, as most of us know it. The Bill to repeal the Mining Tax includes provision to repeal the loss carry-back tax offset for the 2013-14 income year and later income years.
Legislation was tabled in Parliament on 23 June 2014.
The ATO advises that Taxpayers, including those who use early balancing substituted accounting periods, who lodge a company tax return for the 2013–14 income year can self-assess under the existing law.
Once the law is enacted, the ATO will amend the company tax return to disallow the claim for the loss carry-back tax offset for the 2013–14 income year. This will result in an increase in the taxpayer’s tax liability.
No tax shortfall penalties will apply and any interest attributable to the shortfall will be remitted to nil.