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Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013

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2010-2011-2012-2013

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

TAX AND SUPERANNUATION LAWS AMENDMENT (2013 MEASURES N o . 1) BILL 2013

 

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the

Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

 



Table of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1               Amendments to the Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013....................................... 5

 



The following abbreviations and acronyms are used throughout this supplementary explanatory memorandum.

Abbreviation

Definition

TSLAB1 2013

Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013



Amendments

The amendments to the Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013 (TSLAB1 2013) seek to ensure that corporate tax entities can carry losses back to the year they came into existence.

Date of effect The loss carry-back measure applies to assessments for the 2012-13 and later income years.

Proposal announced These amendments have not previously been announced.

Financial impact Nil.

Human rights implications :  Nil.

Compliance cost impact Nil.

 



Outline of chapter

1.1                   This chapter explains the amendments to the Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013 (TSLAB1 2013).

1.2                   The amendments are explained by way of modification to the explanatory memorandum to TSLAB1 2013.

Detailed explanation of the amendments

Amendments 1 and 2

1.3                   The loss carry-back measure in Schedule 5 to TSLAB1 2013 proposes to allow corporate tax entities to carry a tax loss they make in the current income year back to either of the two previous years (the ‘earliest year’ and the ‘middle year’).  If they paid income tax in those years, they can get a refund of that tax (up to a maximum of $300,000) in the form of a tax offset in the current year.  A loss made in the middle year can also be carried back to the earliest year.

1.4                   A corporate tax entity is a company, a public trading trust, a corporate unit trust or a corporate limited partnership.  These are all entity types that are taxed in broadly the same way as a company, ensuring that the tax offset is worked out using the flat corporate rate of tax, not a tax rate that varies according to the entity’s taxable income.

1.5                   To carry a loss back two years from the current year, the entity must be a corporate tax entity for the current year (paragraph 160-10(a)) and throughout the earliest year and the middle year (subsection 160-25(1)).

1.6                   The Bill uses the expression ‘throughout the earliest year and the middle year’ because some of these entity types can change from year to year.  For example, an entity could be a public trading trust for one year but be an ordinary trust for the next year (it therefore would no longer be a corporate tax entity taxed in the same way as a company).

1.7                   However, that expression also raises the possible interpretation that an entity (for example, a ‘start-up’ entity) cannot be a corporate tax entity throughout the income year during which it comes into being because it did not exist as an entity for the whole of that year.

1.8                   Amendments 1 and 2 remove that possibility by disregarding any part of a year before the entity came into existence in deciding if it was a corporate tax entity throughout the relevant period.  [Amendments 1 and 2]

1.9                   No similar amendments are made for the part of a year after a corporate tax entity ceases to exist.  This reflects the fact that the loss carry-back measure is not intended to compensate entities after they have failed.  Therefore, an entity must still be a corporate tax entity throughout the whole of the year for which it claims a loss carry-back tax offset.

1.10               Replace paragraph 6.13 of the Explanatory Memorandum with:

6.13     It must also have been a corporate tax entity throughout the income year the loss is carried back to (disregarding any part of the year before the entity came into existence) and throughout any intervening income year.  [Schedule 5, item 2, section 160-25]