THE INS AND OUTS OF LOSS CARRY BACK RULES

At UHY Haines Norton, we’ve already lodged several returns for our clients utilising the ‘loss carry back’ concession.

This concession is beneficial, because a loss made in the 2013 year can be used to obtain a refund for tax paid in 2012. Take a look at the example below:

YEAR ENDED 30 JUNE 2012:

Taxable income:        $600,000
Tax paid at 30%:        $180,000

YEAR ENDED 30 JUNE 2013:

Taxable loss:            $(350,000)
Available refund        $105,000  

This is a great cashflow benefit, especially for clients whose profits fluctuate year to year.

Remember, the concession is only available for companies where there is a loss in the year ended 30 June 2013, and a profit in the year ended 30 June 2012.

The refund you can obtain on lodgement of the 2013 income tax return is subject to a limit.  The maximum refund is the lowest of:

• $300,000
• The franking account balance at 30 June 2013
• The tax paid in the 30 June 2012 financial year.  In the above example, if a loss of $700,000 was made in the year ended 30 June 2013, the maximum refund available would be $180,000.

Important note: The Coalition Government announced before the election they would abolish this concession.  The new Government is yet to specify the date of removal, and we expect it will only remain in place for the 2013 financial year.  Given this, we would recommend the amount of loss carried back in the 2013 tax return be the highest amount possible.

If you paid tax last year, and think you will have a loss this year, you should be lodging as soon as possible.  This will give you the cash flow benefit of receiving your refund entitlement now.