Treasurer woos travel industry with carryback tax scheme

May 8, 2012 Financial, Headline News 2 Comments  Print  Email

The tourism industry has reacted positively to an announcement by Federal Treasurer Wayne Swan that companies will be allowed to offset up to AUD1 million in losses against tax paid in better years.

The change, foreshadowed by Swan in advance of tonight’s Budget, will let businesses “carry back” losses, offsetting them against earlier profitable years to gain a refund of tax paid previously on that profit – up to AUD300,000 maximum.

Industry lobby group the Transport and Tourism Forum (TTF) welcomed the measure, saying it has arrived at the right time, given the slow economy and lacklustre retail sales.

TTF chief executive John Lee pointed out in Melbourne’s Herald-Sun that the tourism industry is highly seasonal, with profits fluctuating greatly. It’s also volatile. Weather, airline profitability, the strong Australian dollar and terrorism threats can hit the hotel and hospitality industry with little or no warning.

Lee cited Cyclone Yasi in Queensland as an example. Smoothing out earnings over two tax years could help give businesses the confidence to invest, even in hard times, he said.

Small travel and tourism businesses, which operate as partnerships or sole traders rather than companies, may miss out on the tax loss carryback benefits. Details will be announced in tonight’s Budget, forecast by some to be the toughest Federal Budget in a generation.

The Government is trying to return the Budget to surplus by 2012-13 in a two-speed economy where tourism is being hammered, along with manufacturing and retail, while the mining sector is thriving.

The worst scenario for tourism in such circumstances, Lee said earlier, would be for Budget measures to cut marketing funding.

Tourism Australia provides marketing, research, tools and resources to the Australian tourism industry to market Australia to global and domestic markets. The country is currrently trying to attract overseas investment in its tourism industry.

Lee warned that although latest projections by the Tourism Forecasting Committee anticipate tourism growth – that should not be used as rationale for trimming marketing funds.

The Tourism Forecasting Committee (TFC) is expecting international arrivals to rise 1% in 2011-12, with stronger growth of 3% in 2012-13. On the domestic front, visitor nights are expected to rise 1.5% this financial year, with growth moderating to 0.7%  in 2012-13.

Lee said the forecasts underscored the need to maintain broad international marketing activity.

“Arrivals from Asia are expected to rise by 4% in 2011-12 and then by 5.6% next financial year,” he said, “reaching 2.6 million visitors in 2012-13.

“However, an increased focus on marketing activity in Asia, including China, must be funded with additional money, not by shifting resources from other areas.

“Arrivals from all other markets will remain steady at around 3.5 million, still accounting for 69 per cent of all international visitors.

“This clearly shows the need to continue to market Australia aggressively in non-Asian countries, which includes many of our traditional European and North American markets.

“Decreasing activity in other countries risks losing market share to our competitors and undoing all the hard work that has been done over recent years in positioning Australia as a must-see destination.

“Tourism marketing helps to drive visitation, which promotes economic activity and supports employment across Australia, including in regional areas highly dependent on tourism spending.”

Written by : Peter Needham