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  • Change in loss carry back choice

    How to change your loss carry back choice and whether a change will affect your assessments for subsequent income years.

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    Changing loss carry back choice

    When you made your original loss carry back choice, you specified how much of the tax loss from a particular income year you were carrying back to an earlier income year. If you want to change your loss carry back choice, it:

    Changing the loss carry back choice for an income year may also affect your assessments for subsequent income years.

    Example: change in loss carry back choice

    XYZ Co made a loss carry back choice in its Company tax return 2021 to carry back $5,000 of the $10,000 tax loss it made in that income year to the 2019–20 income year. Later it decides that it wants to carry back all the $10,000 tax loss to the 2019–20 income year.

    XYZ Co notifies us of its change in loss carry back choice using the approved form within the time limit for amending its tax assessment for the 2020–21 income year. To notify us using the approved form, XYZ Co completes the Loss carry back change in choice schedule 2021 and lodges it with its amendment request for Company tax return 2021.

    End of example

    Correcting error in choice to carry back more than the tax loss amount for a year

    You cannot use this schedule to change an amount of tax loss that you chose to carry back if that specified amount of tax loss exceeded the correct amount of tax loss for that income year.

    If you need to make a choice to carry back the correct amount of tax loss, and you are:

    Approved form

    To notify us of a change to a loss carry back choice, you will need to:

    Effect on subsequent income years

    Changing the loss carry back choice for an income year takes effect from the day you made your original loss carry back choice. This may affect:

    • the amount of tax losses available to be carried forward to use in a later income year
    • a loss carry back choice for subsequent income years.

    Lodge an amendment request to any company tax returns that you have lodged for a subsequent income year that are affected by the change you made to your original loss carry back choice.

    Example: change affects the amount of tax losses available to be carried forward to or deducted in later income years

    JKL Co is not a base rate entity. For the 2019–20 income year, JKL Co has a taxable income of $300,000, no net exempt income and income tax liability of $90,000.

    For the:

    • 2020–21 income year  
      • JKL Co has a tax loss of $800,000 and chooses to carry back $300,000 of that loss to the 2019–20 income year
      • the amount of its tax offset is worked out to be $90,000
      • the amount of tax loss carried forward is $500,000
       
    • 2021–22 income year  
      • JKL Co has taxable income (before deducting tax losses) of $60,000
      • after deducting $60,000 of the remaining tax loss it carried forward, it has no taxable income and carries forward the remaining tax loss of $440,000
       
    • 2022–23 income year  
      • JKL Co has taxable income (before deducting tax losses) of $290,000
      • after deducting $290,000 of the remaining tax loss it carried forward, it has no taxable income and carries forward the remaining tax loss of $150,000.
       

    JKL Co's assessment for the 2019–20 income year is subsequently amended to increase the taxable income to $600,000, resulting in tax payable of $180,000.

    JKL Co notifies us, using the Loss carry back change in choice schedule 2021 that it has changed its original loss carry back choice for the 2020–21 income year to increase the amount of tax loss carried back to the 2019–20 income year from $300,000 to $600,000. The tax offset for the 2020–21 income year is increased to $180,000 and the amount of tax loss carried forward is reduced to $200,000.

    As a result:

    • JKL Co will still have no taxable income in the 2021–22 income year but the tax loss remaining to be carried forward in the 2021–22 income year is reduced to $140,000
    • JKL Co lodges an amendment request for the 2022–23 income year, as JKL Co only has $140,000 of tax loss available to be deducted, resulting in a taxable income of $150,000.
    End of example
    Last modified: 04 Jul 2022QC 68044