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Loss carry back plan is too little – IPA
THE FEDERAL Government’s plan to bring back the loss carry back initiative is being welcomed by the Institute of Public Accountants (IPA), but it will not help the majority of small businesses, IPA’s analysis shows.
The offset rate increases are welcomed but the cap of $1,000 is inadequate, IPA chief executive officer, Andrew Conway said.
“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,” Mr Conway said.
“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 two or stage three tax cuts, this initiative directly rewards individuals who take on the arduous challenge to run a small business. 
“The small business income tax offset (also known as the unincorporated small business tax discount) can reduce the tax a business pays by up to $1,000 each year. Only taxpayers carrying on a small business as a sole trader or have a share of net small business income from a partnership or trust are eligible.
“The rate of the offset was 8 percent up to the end of the 2019-20 income year but will increase to 13 percent for 2020-21 and again increase to 16 percent for 2021-22 and then remain at that level,” Mr Conway said.
“While we are pleased that the small business tax offset rate is increasing, it is still capped at $1,000 which means that most small businesses will achieve their offset faster, rather than enjoy any more benefit as the rate increases.
“To incentivise small business to employ people, we are calling for the rate and threshold increases to be tied to small businesses which employ people,” he said.
“Over 60 percent of small businesses are non-employing and in the current environment the government needs to encourage all businesses, both small and big, to do their bit to soak up the pool of unemployed,” Mr Conway said.
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