Small Business Owner unhappy as he misses out on loss carry back

Small Business Shut Out From Loss Carry Back


Thousands of small businesses are set to miss out on accessing the temporary loss carry back provisions due to its limitation to corporate entities.

The National Tax and Accountants’ Association has now written to Treasurer Josh Frydenberg to call for the expansion of the loss carry back provisions to non-corporate entities such as sole traders, partnerships and trusts.

The temporary loss carry back measure, which was announced in the federal budget and passed through Parliament last week, currently only allows corporate tax entities with an aggregated turnover of less than $5 billion to carry back a tax loss for the 2020, 2021 or 2022 income year and apply it against tax paid in a previous income year as far back as the 2018–19 income year.

“Many businesses affected by the economic impact of COVID-19 are carried on by hard-working Australians through a non-corporate entity, such as in their own name, in a partnership or in a trust,” said NTAA chief executive Geoff Boxer.

“Furthermore, these businesses are being affected by the economic impact of COVID-19 in the same (or in a similar) way as businesses carried on in a company.

“As a result, non-corporate taxpayers carrying on a business should also have access to similar temporary tax loss carry back rules that will become available to eligible companies under the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020.”

The loss carry back is expected to cost the government $4.9 billion, with Mr Frydenberg using his federal budget speech to claim that the measure would help “millions of small and medium-sized businesses” who were forced into a loss-making position because of COVID-19.

However, the Institute of Public Accountants believes up to two-thirds of small businesses will miss out on the loss carry back measure because of the corporate entity requirement.

“While we fully support the loss carry back scheme and continue to advocate for it to be a permanent fixture of our tax system, it does not help unincorporated small businesses,” said IPA chief executive Andrew Conway.

“The majority of small businesses are unincorporated entities, and therefore, this policy will not directly benefit the army of entrepreneurs struggling to survive in a post-COVID world.

“Increasing the unincorporated tax discount would be a better option to incentivise most of the unincorporated small businesses around the country to take a risk, grow their business and employ workers. While this group will enjoy any brought-forward stage 2 or stage 3 tax cuts, this initiative directly rewards individuals who take on the arduous challenge to run a small business.”


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