New loss carry-back provisions will be restricted to revenue losses and not capital losses.On Friday, Treasury issued a discussion paper, providing details of the operation of the new loss carry-back arrangements and calling for submissions.The Government announced in the Budget that companies would be allowed to claim losses against earnings in previous years.Lenders are among those that stand to gain from the change. The poor cash-flow situation that many companies suffer because of the current treatment of losses limits their ability to service debt.According to the discussion paper, loss carry-back will be achieved through the use of a refundable tax offset in the claim year. The relevant proportion of the company's tax losses will be converted to a refundable tax offset and paid to the company.This approach will overcome a situation where a taxpayer's assessment for the year in which the company incurred a loss and claimed loss carry-back might subsequently be amended, such that the company was not entitled to a loss carry-back.The paper confirms that a one year carry-back period will be allowed for the 2012/13 income year, followed by a two year carry-back from the 2013/14 income year onwards.What this means is that a loss carry-back refund will be able to be claimed for the 2012/13 income year against tax paid in 2011/12.The paper also confirmed that a A$1 million cap will apply in each claim year to the amount of losses that any company can carry back against taxes paid in previous income years.The loss carry-back provisions will be available to companies and to entities linked to companies (for example, as a corporate limited partnership) but not trusts, partnerships or sole traders.The maximum amount of the tax value of loss carry-back cannot exceed the balance of a company's franking account at the end of the income year for which the loss carry-back is claimed. There will be a debit to the company's franking account balance for the tax value of each loss carry-back.In relation to the integrity rules, the continuity of ownership test will be satisfied if the same persons have more than 50 per cent of the company's voting power, rights to dividends and rights to capital distribution during the ownership test period.