Loss carry-back and instant asset write-off: Unlikely coalition calls for stay of execution on small business tax breaks

The Australian Chamber of Commerce and Industry has called on the federal government to decouple two small business tax concessions from the mining tax that nominally funded them.

The call, made in a submission to the Senate Economics Legislation committee, relates to the loss carry-back tax regime and the instant asset write-off. Both tax breaks are due to expire on January 1.

“The previous government was warned in 2010 by ACCI that linking small business tax measures to a badly designed mining tax could short change small business and mire their interests in the politics of resource industry taxation,” ACCI chief Peter Anderson said.

“Decoupling small business tax relief from the mining tax, and funding it via efficiency savings in next year’s federal budget following the Commission of Audit, would be the right policy approach, especially as ACCI’s evidence to the committee was that the non-mining economy requires a measure of cashflow stimulus that these tax breaks provide.”

ACCI’s arguments have found support in surprising sectors.

The Australian Council of Trade Unions, for example, also supported keeping the tax breaks. In its submission, it argued strongly for retailing the loss carry-back regime.

Tim Lyons, the assistant secretary of the ACTU, wrote that the regime was “an important measure that ended the asymmetric treatment of tax losses.

“It was an important reform, particularly for small and medium-sized businesses, especially in circumstances of an economic downturn. The Business Tax Working Group, which was made up of business groups, myself, academics and tax professionals, had a fair bit of difficulty agreeing on a lot of things but we did manage to agree on this as an important reform. It was a good thing the former government took it up. It is good for [small and medium enterprises] and it should be retained for the future.”

The ACTU argued that without the loss carry-back regime, more small businesses would fail during economic downturns, negatively impacting the employment of their members.

The arguments were mirrored by those of the Construction, Forestry, Mining and Energy Union, which said the loss carry-back regime could “help a firm survive a tough year or two”.

Manufacturing industry body the Ai Group also added its voice to the chorus asking for the tax measure to be retained.

In its submission, it argued that loss carry-back regimes were necessary to aid business cashflow in tough times.

“Businesses making a loss need cash now. Rather than having a contingent asset on their books, if you like – that is, an ability to claim money when they are making money – loss carry-back would be much better for them and for their businesses, and would reduce the business closure and so on that results when businesses go through this cashflow crisis in a year they make a loss.

“The present law gives them access on a limited basis to some of the tax they paid in the previous year, in the year they make a loss. This provides a very important boost to their cashflow at a time when they need it most and at a time when it is going to be most critical in ensuring the survival of that business.”

The Real Estate Institute of Australia said the loss of both tax breaks would have a “major detrimental impact on real estate agencies, their employees, and in general, all small businesses”.

“For real estate agencies, cars are a major part of conducting business and the asset base. The proposed repeal of the accelerated depreciation provisions will see a reduction in cashflow and a reduced turnover in motor vehicles with the consequent impacts on the local vehicle industry. The consequences on the turnover of computers and other office equipment will be similar.”

In their dissenting submission to the report, Labor senators decried the effect the removal of the tax breaks would have on “up to 110,000 businesses”.

“The Coalition’s plan to remove these small business investment incentives has united big and small business in opposition, with both the Ai Group and Council of Small Business of Australia (COSBOA) speaking out against the removal,” the submission said.

“The Ai Group said the reduction in the small business instant asset write-off threshold would ‘add complexity and compliance costs for eligible small businesses’. This completely contradicts the government’s commitment to reducing compliance costs and red-tape by $1 billion a year.”

The government has left the door open to reintroduce the tax breaks.

In its formal recommendations on the bill, the committee recommended that the government “revisit certain measures of the bill, in particular … taxation issues affecting small business, once the budget returns to strong surplus.”


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