The Council of Small Business (COSBOA) has welcomed the announcement of the introduction of tax ‘loss carry back’ for small business as announced in the Federal Budget this week.
This will allow a company to apply operating losses to a preceding years income to reduce tax liabilities. So if a retailer made a profit in 2012/13 on which they paid tax, they could claim that tax back at the end of 2013/14 – if they made a loss. (The scheme is not applicable to the 2011/12 tax year.)
The maximum refund of previously paid taxes that small business will receive is $300,000 (as eligible losses will be capped at $1 million). This applies only to companies – not partnerships or sole traders, so only benefits 110,000 of Australia’s 2.7 million small businesses.
It should apply to many photo retailing businesses, however, as employing staff and leasing premises generally dictates that a business be incorporated.
‘This will, support business when they need it – providing an injection of funds to invest in new ideas, equipment and markets,’ said The Treasurer, Mr Swan.
‘This is a welcome announcement as it will provide business people with better means to manage change and manage difficult times in their business cycle.
‘This idea has come from many business groups, including COSBOA, and provides another way for businesses to plan and manage their business activities.
‘No one business will ever be unaffected by change and this decision means that those who are hit hard by overnight changes in technology and international trading conditions may be able to better manage that change.
‘The people involved will be able to better manage stress and then develop new plans, new products and new processes knowing that any loss can be carried back to free up cash flow.’
Mr Strong warned that the process to claim the carry back has to be easy and manageable. We need to ensure that this decision is not watered down by poor process,’ he said. ‘Accountants with an understanding of small business, such as those from the Institute of Public Accountants, need to be consulted in the design of the process and it must be easy to use and not costly for the business person, otherwise the process will defeat the purpose.
Small business owners will also be able to write off any new business asset they buy up to a value of $6500 except for vehicles, where the write off is for assets worth up to $5000. This will be available to all forms of small business including sole traders, etc.
‘Good in parts’, says retailers’ group
The Australian Retailers Association (ARA) said retailers would view last night’s Federal Budget announcement with mixed feelings after it gave some relief to business and households but didn’t go far enough in providing long- lasting support for a struggling sector.
ARA president Roger Gillespie said the Budget had fallen short for retailers and the scrapping of the promised one percent reduction in business tax showed government was financing a return to surplus by penalising business.
The gave a tick to the tax loss carry back scheme, asset write-offs under $6500, the extension of the Small Business Advisory Service, and the spending stimulus from Family Tax A and the ‘Schoolkids bonus’.
‘ARA is disappointed retailers will suffer from the abandonment of an important promised tax cut from 30 to 29 percent,’ said Mr Gillespie.
‘ARA is concerned the Government has given with one hand through initiatives for business and consumers but taken with the other with no compensation for the Carbon Tax or superannuation increases, which will hit retailer and consumer confidence once short term Budget benefits wear off.’