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  • How companies use tax losses

    Carrying a tax loss forward

    Companies can generally carry forward a tax loss indefinitely, and use it when they choose, provided they have either substantially maintained the same ownership and control or carried on the same business since the tax loss was incurred.

    Carrying a tax loss back

    In 2012–13 income year, some companies could carry a tax loss back and receive a refund by claiming a tax offset against the tax they had previously paid – known as a loss carry-back tax offset. The loss carry-back tax offset has been repealed from 30 September 2014.

    Most eligible taxpayers can claim the loss carry-back tax offset for the 2012–13 income year. However, you may not be able to claim the loss carry-back tax offset for any year if you are a taxpayer with certain late balancing substituted accounting periods.

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    When losses can be used

    Companies can generally use carried forward losses in any future income year, although they must be deducted in the order in which they were incurred, and special rules apply to net exempt income and franked dividend income.

    Continuity of ownership, control, and same business tests

    To deduct a tax loss a company must satisfy both the continuity of ownership test (COT) and the control test or satisfy the same business test (SBT). The normal loss deduction rules are modified for widely held or eligible Division 166 companies so the rules are easier to apply.

    Current year tax losses

    If the ownership or control of a company changes part way through a loss year and the company does not maintain the same business, the general loss deduction rules may be overridden by the current year loss rules.

    Consolidated groups and losses

    When a wholly owned group consolidates for income tax purposes or a company joins an existing consolidated group by way of becoming wholly owned by the group’s head company, pre-consolidation losses incurred by group companies can generally be transferred to and used by the head company.

  • Last modified: 09 Oct 2014QC 23601