Final report on the tax treatment of losses

13 Apr 2012

The Business Tax Working Group (Working Group) was established following the Tax Forum in October 2011 to consider what kind of business tax system will best support Australia’s future growth prospects, particularly when set against the context of the major structural changes that are occurring within the economy at present.

Australian businesses are under pressure to adapt and change their business models to overcome challenges and make the most of opportunities arising from structural changes underway within the economy. Now more than ever it is important that the tax system does not get in the way of businesses wanting to invest and innovate. Our current business tax system however, penalises investments that have some risk of failure through its treatment of losses.
This penalty against risk taking can influence the kinds of investments undertaken and how much investment occurs. The Working Group’s terms of reference focus on reducing taxes on new investment to encourage Australian businesses to undertake innovation and entrepreneurial activity. We have been asked to focus initially on how changes to the treatment of tax losses might help to relieve the tax burden on new investment.
In arriving at this final report on the tax treatment of losses the Working Group has provided the Treasurer an interim report, sought submissions in response to that report and conducted some limited confidential consultation. Later this year we will consider whether other changes, including a further corporate tax rate cut or a move towards a business expenditure tax system, (in particular an allowance for corporate equity) would best support new business investment in the longer term.

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