As part of the Federal Budget 2020-21, the government announced a loss carry back measure to encourage new investment and work with the temporary asset expensing measures also announced at the budget.

The new law started on 1 January 2021.

Eligible corporate entities that previously had an income tax liability in a relevant year, and have subsequent losses, can claim a refundable tax offset up to the amount of their previous liability.

The measure allows significant tax losses, which may then be carried back to generate cash refunds for eligible businesses.

Who is Eligible?

• Your business must be a company, corporate limited partnership or a public trading trust in the income year you want to claim the offset.
• The business must have had an aggregated turnover of less than $5 billion.
• The entity had an income tax liability for financial years 2019, 2020 or 2021.
• The entity subsequently made a loss in financial years 2020, 2021 or 2022.
• Your business is up to date with tax return lodgment obligations for the last five years.

There are specific guidelines about eligibility, integrity, and tax offset calculation. We can talk to you about whether you can use the loss carry back measure to benefit your business.

You can only claim the tax loss once, in either the 2021 or 2022 financial year, so it’s important to get advice about how and when to apply this measure for your business. To claim the tax offset, the ATO must be notified before lodging the company tax return that year.