What was then?
Companies can either carry forward their unutilised capital allowances (CAs) and trade losses to offset future incomes (i.e. loss carry-forward) or transfer these unutilised CAs and trade losses to offset profit in related companies as part of group relief.

What was wrong?
These schemes may not provide adequate or timely support to smaller businesses that run into cash flow problems, particularly during a cyclical downturn.

What is the solution?
Starting YA 2006, a one-year carry-back of current year unutilised CAs and trade losses will be introduced.

The main features of the scheme are:

a) Only current year unutilised CAs and trade losses will be allowed to be carried back for one YA immediately preceding the YA in which the CAs were granted or the trade losses incurred.

b) Up to $100,000 of current year unutilised CAs and trade losses can be carried back.

c) The carry-back system will be available to all businesses, including sole proprietors and partnerships.

d) The current requirements for carry-forward of unutilised CAs and trade losses will similarly apply when these amounts are carried back i.e. no substantial change in shareholding and nature of business.