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  • 13. Losses information

    Loss carry back

    Eligible corporate tax entities with less than $5 billion turnover in a relevant loss year can carry back losses made in the 2019–20, 2020–21 and 2021–22 income years to a prior year's income tax liability in the 2018–19, 2019–20 and 2020–21 income years. See Loss carry back.

    Tax loss amounts you choose to carry back to previous income years cannot be carried forward to a later income year.

    Consolidated or MEC groups

    Any company that is a subsidiary member of a consolidated or MEC group at the end of 2020–21 is not required to complete U and V and Loss carry back. Other companies, including the head company of a consolidated or MEC group at the end of 2020–21, may need to complete U and V and Loss carry back.

    In this section:

    U – Tax losses carried forward to later income years

    Write at U the unapplied (undeducted or not transferred) amount of tax losses incurred by the company and carried forward to a later income year under section 36-17 of the ITAA 1997. Exclude any amount of the tax losses carried back to previous income years which has been provided at A, B and C in item 13.

    If the company is a designated infrastructure project (DIP) entity, ensure the amount of tax losses carried forward to later income years include any uplift amount. Net exempt income (if any) must be taken into account in calculating the amount of tax losses carried forward to a later income year, see sections 36-10 and 36-17 of the ITAA 1997.

    Tax losses carried forward may be affected by the commercial debt forgiveness provisions, see Appendix 1.

    Under sections 36-17 and 36-55 of the ITAA 1997, a company is, subject to certain limitations, able to choose the amount of prior year tax losses it wishes to deduct in a later year of income from the excess (if any) of its assessable income over total deductions (other than tax losses). Providing choice means that companies can choose not to deduct prior year losses in order to pay sufficient tax to be able to frank their distributions. In certain circumstances, a company is able to convert excess franking offsets into a tax loss for the income year and carry forward the tax loss for consideration as a deduction in a later income year. If the company has excess franking offsets at H Excess franking offsets item 8, calculate the company’s tax loss for the income year under the method statement in subsection 36-55(2) of the ITAA 1997 as follows:

    • Step 1: Work out the amount (if any) that would have been the company’s tax loss for the year under section 36-10, 165-70, 175-35 or 701-30 of the ITAA 1997, disregarding any net exempt income.
    • Step 2: Divide the amount of excess franking offsets by the applicable corporate tax rate.
    • Step 3: Add the result of steps 1 and 2.
    • Step 4: Take away the company’s net exempt income (if any).

    The result (if a positive amount) is the company’s tax loss for the income year. Include this amount at U with any unapplied tax losses from prior income years.

    If you are required to complete a Losses schedule 2021, the amount of the tax losses you show at U Total at item 1 Tax losses carried forward to later income years in part A of that schedule must be the same as the amount you show at U on the Company tax return 2021.

    Do not include any net capital losses to be carried forward to later income years at U. Show these separately at V Net capital losses carried forward to later income years item 13 on the Company tax return 2021 and in the CGT schedule, if a CGT schedule is required.

    Consolidated or MEC groups

    If a head company of a consolidated or MEC group is required to complete a Consolidated groups losses schedule 2021, the amount of the tax losses shown at U Total at item 5 Tax losses carried forward to later income years in part A of that schedule must be the same as the amount shown at U on the Company tax return 2021.

    If the company is a subsidiary member of a consolidated or MEC group at the end of the income year, U is not applicable.

    V – Net capital losses carried forward to later income years

    Write at V the total of any unapplied net capital losses from collectables and unapplied net capital losses from all other CGT assets and events. This information is calculated or transferred from:

    • 3B in table 5 and 3A at Specified countries of the CGT summary worksheet, or
    • A and B in part 3 of the CGT schedule, if a CGT schedule is required.

    See also:

    If the company is required to complete a Losses schedule 2021, the amount of the net capital losses shown at V Total at item 2 Net capital losses carried forward to later income years in part A of that schedule must also be the same as the amount shown at V on the Company tax return 2021.

    Consolidated or MEC groups

    If a head company of a consolidated or MEC group is required to complete a Consolidated groups losses schedule 2021, the amount of the net capital losses shown at V Total at item 10 Net capital losses carried forward to later income years in part A of that schedule must also be the same as the amount shown at V on the Company tax return.

    If the company is a subsidiary member of a consolidated or MEC group at the end of the income year, V is not applicable.

    Loss carry back - new labels

    A – Tax loss in 2019–20 carried back to 2018–19

    B – Tax loss in 2020–21 carried back to 2018–19

    C – Tax loss in 2020–21 carried back to 2019–20

    G – Tax rate 2019–20

    I – Net exempt income 2018–19

    J – Net exempt income 2019–20

    L – Income tax liability in 2018–19

    M – Income tax liability in 2019–20

    O – Select your aggregated turnover range

    P – Aggregated turnover

    S – Loss carry back tax offset

    Eligible corporate tax entities with an aggregated turnover of less than $5 billion can choose to carry back some or all of tax losses for 2019–20, 2020–21 and 2021–22 to earlier income years in which it had income tax liabilities. The loss carry back offset is a refundable tax offset.

    An entity is eligible to claim the loss carry back tax offset if all of the following conditions are met:

    • The entity is a corporate tax entity throughout the loss year and the years the loss is carried back to. An entity is a corporate tax entity if it is a    
      • company
      • public trading trust, or
      • corporate limited partnership.
       
    • The entity was a small business entity or would have been a small business entity if the aggregated turnover limit was $5 billion in the loss year.
    • The entity had a tax loss in 2020–21 and/or 2019–20 income year.
    • The entity had an income tax liability for 2018–19 and/or 2019–20 income year.
    • The entity makes a loss carry back choice in the 2020–21 Company tax return.
    • Any of the following requirements is satisfied for 2020–21 and each of the five income years immediately preceding it:    
      • income tax return have been lodged
      • the entity was not required to lodge an income tax return for the year or
      • the Commissioner made an assessment of the entity’s income tax for the year .
       

    The offset that you will be entitled to is limited to the lesser of:

    • the tax liability for each year you carry the loss back to
    • the surplus in your franking account on the last day of 2020–21.

    If you choose to carry back some or all of your tax loss, this amount cannot be utilised again, for example, carried forward to claim against future income.

    A, B, C – Tax losses you choose to carry back

    • Show at A the amount of tax losses incurred in 2019–20 that the entity is choosing to carry back to 2018–19.
    • Show at B the amount of tax losses incurred in 2020–21 that the entity is choosing to carry back to 2018–19.
    • Show at C the amount of tax losses incurred in 2020–21 that the entity is choosing to carry back to 2019–20.

    The following losses cannot be carried back:

    • net capital losses
    • tax losses that have been transferred under Division 170-A – transfers of losses within certain wholly-owned groups of companies
    • tax losses that have been transferred under Subdivision 707-A – transfers to the head entity of a consolidated group by an entity joining the group
    • excess franking tax offsets which have been converted into tax losses (refer to section 36-55).

    If you need to complete a Losses schedule 2021, the total of the amount you show at A to C at item 13 on the Company tax return must be included at H Tax losses deducted in part F of the Losses schedule.

    If a head company of a consolidated or MEC group is required to complete a Consolidated groups losses schedule 2021, the total of the amount shown at A to C at item 13 on the Company tax return must be included in I Tax losses deducted in part F of the Consolidated groups losses schedule.

    G – Tax rate 2019-20

    Complete G only if you are choosing to carry back a tax loss from 2019–20.

    Write at G the tax rate you used to calculate your income tax liability in 2019–20.

    I and J – Net exempt income

    If the entity is choosing to carry back a loss to the 2018–19 year, write at I the amount of any unutilised net exempt income that the entity had in the 2018–19 year.

    If the entity is choosing to carry back a loss to the 2019–20 year, write at J the amount of any unutilised net exempt income that the entity had in the 2019–20 year.

    Net exempt income can be derived by subtracting expenditure incurred in deriving exempt income from the amount of all income that is exempt from Australian tax. Net exempt income for an income year is calculated under section 36-20 of the ITAA 1997 and may differ from the amount of exempt income that was shown in that year's income tax return. Do not include an amount of net exempt income that has already been utilised. See subsection 960-20(4) of the ITAA 1997.

    L and M – Income tax liability

    If the entity is choosing to carry back a loss to the 2018–19 year, show at L the amount of income tax assessed to the entity for the 2018–19 year. This is the amount assessed at T5 Tax payable in the calculation statement of the Company tax return 2019 or the tax liability after any amendments to the 2018–19 year.

    If the entity is choosing to carry back a loss to the 2019–20 year, show at M the amount of income tax assessed to the entity for the 2019–20 year. This is the amount assessed at T5 Tax payable in the calculation statement of the Company tax return 2020 or the tax liability after any amendments to the 2019-20 year.

    O – Select your aggregated turnover range

    Complete O and P only if you have made the choice to carry back a loss from 2019–20.

    You will not be penalised for specifying an incorrect category where you make your best attempt to calculate your aggregated turnover.

    Show at O the category for your aggregated turnover range for 2019–20. Select a category from the table below based on your aggregated turnover range and write the category code at O. Your aggregated turnover range selected can be either your 2019–20 aggregated turnover or your 2018–19 aggregated turnover. For further information, see Aggregation.

    Category

    Aggregated annual turnover ranges

    A

    $0 to less than $7.5 million

    B

    $7.5 million to less than $10 million

    C

    $10 million to less than $20 million

    D

    $20 million to less than $40 million

    E

    $40 million to less than $50 million

    F

    $50 million to less than $100 million

    G

    $100 million to less than $200 million

    H

    $200 million to less than $300 million

    I

    $300 million to less than $400 million

    J

    $400 million to less than $500 million

    K

    $500 million to less than $600 million

    L

    $600 million to less than $700 million

    M

    $700 million to less than $800 million

    N

    $800 million to less than $900 million

    O

    $900 million to less than $1 billion

    P

    $1 billion or over

    P – Aggregated turnover

    Show at P your actual aggregated turnover rounded to the nearest $100 million if:

    • you selected category P (that is, aggregated turnover $1 billion or over) at O or are a significant global entity and completed label O. Your aggregated turnover specified can be either your 2019–20 aggregated turnover (the income year you have carried back a loss from) or your previous year's aggregated turnover, 2018–19.

    You will not be penalised for specifying an incorrect amount where you make your best attempt to calculate your aggregated turnover.

    S – Loss carry back tax offset

    Use the following method to calculate your loss carry back tax offset.

    • Step 1 For each tax loss that you are carrying back to an earlier income year:
    1. Determine the amount of the tax loss you are carrying back.
    2. Work out the net exempt income, that has not previously been used, in that earlier income year.
    3. Subtract the amount at step 1b from the amount at step 1a.
    4. Multiply the result from step 1c by your tax rate for the income year in which you made the loss.

    Record the result from Step 4 at S and include this amount at E in the calculation statement.

    Example 14a

    In 2020–21, QWD Construction Pty Ltd (QWD) made a tax loss of $1,300,000 and chooses to carry the whole of the loss back to 2018-19 and 2019-20. QWD is eligible to claim the loss carry back tax offset.

    Tax return Information

    • taxable income for 2018–19: $1,000,000
    • unutilised net exempt income for 2018–19: $100,000
    • income tax liability for 2018–19: $300,000
    • taxable income for 2019–20: $500,000
    • net exempt income for 2019–20: $0
    • income tax liability for 2019–20: $150,000
    • franking account balance at the end of 2020–21: $500,000
    • tax rate for all years: 30%

    Method statement

    Step 1 for the loss carried back to 2018–19:

    • QWD choses to carry back $1,100,000 of the tax loss in 2020–21 to 2018–19. It therefore records $1,100,000 at B.
    • QWS subtracts the unutilised exempt income of $100,000 from carried-back loss leaving $1,000,000.
    • $1,000,000 is multiplied by the tax rate for 2020–21 (30%) giving a result of $300,000.

    Step 2 for the loss carried back to 2018–19:

    • Only the loss from one year is being carried back to 2018–19 and the result from step 1 was $300,000.
    • This does not exceed the tax liability for 2018–19 and therefore the step 2 amount for 2018–19 is $300,000.

    Step 1 For the loss carried back to 2019–20:

    • QWD choses to carry back $200,000 of the tax loss in 2020–21 to 2019–20. It therefore records $200,000 at C.
    • There was no exempt income in 2019–20 and therefore no reduction is necessary.
    • $200,000 is multiplied by the tax rate of 30% giving a result of $60,000.

    Step 2 For the loss carried back to 2019–20:

    • Only the loss from one year is being carried back to 2019–20 and the result from step 1 was $60,000.
    • This does not exceed the tax liability for 2018–19 and therefore the step 2 amount for 2019–20 is $60,000.

    Step 3 The amounts calculated for step 2 for 2018–19 and 2019–20 are added together and equal $360,000.

    Step 4 The amount calculated for step 3 does not exceed the franking account surplus on 30 June 2021. Therefore, the loss carry back offset is $360,000. In its 2020–21 Company tax return, QWD claims $360,000 loss carry back refundable tax offset by:

    • writing 360,000 at S
    • adding 360,000 to other amounts (where applicable) at E on the calculation statement.

    QWD has no tax losses available from 2020–21 to carry forward.

    Example 14b

    QWD Construction Pty Ltd (QWD) made a tax loss of:

    • $1,300,000 in 2020–21
    • $400,000 in 2019–20.

    It is eligible to claim the loss carry back tax offset and wants to do so.

    Tax Return Information

    • taxable income for 2018–19: $1,500,000
    • income tax liability for 2018–19: $450,000
    • tax loss for 2019–20: $400,000
    • tax rate for 2019–20: 27.5%
    • tax loss for 2020–21: $1,300,000
    • tax rate for 2020–21: 26%
    • franking account balance at the end of 2020–21: $500,000

    Method statement

    Step 1 For the loss made in 2019–20:

    • QWD choses to carry back all $400,000 of the 2019–20 tax loss to 2018–19. It therefore records $400,000 at A.
    • There was no exempt income in 2018–19 and therefore there is no reduction.
    • $400,000 is multiplied by the tax rate of 27.5% for 2019–20, giving a total of $110,000.

    Step 1 For the loss made in 2020–21:

    • QWD choses to carry back $500,000 of the 2020–21 tax loss to 2018–19. It therefore records $500,000 at B.
    • There was no exempt income in 2018–19 and therefore there is no reduction.
    • $500,000 is multiplied by the tax rate of 26% for 2020–21, giving a result of $130,000.

    Step 2 The amounts calculated at step 1 for the losses carried back from the 2019–20 and 2020–21 are added together and equal $240,000. As this amount does not exceed the tax liability for 2018–19, the step 2 amount is $240,000.

    Step 3 The losses are carried back to only one earlier income year, 2018–19, therefore the step 3 amount is also $240,000.

    Step 4 The amount calculated for step 3 does not exceed the franking account surplus on 30 June 2021. Therefore, the loss carry back offset is $240,000.

    In its 2020–21 Company tax return, QWD claims $240,000 loss carry back refundable tax offset by:

    • writing it at S
    • adding it to other amounts (where applicable) at E on the calculation statement.

    QWD has $800,000 tax losses remaining to carry forward from 2020–21 as is recorded at U

    End of example

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    Last modified: 27 May 2021QC 64886