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  • Loss carry back

    On 6 October 2020 as part of the 2020–21 Budget, the government announced that it will target support to businesses and encourage new investment through a loss carry back regime. Eligible corporate entities that previously had an income tax liability in a relevant year and have subsequently made taxable losses can claim a refundable tax offset up to the amount of their previous income tax liabilities.

    The measure interacts with the government announcement on JobMaker Plan – temporary full expensing to support investment measure. This will allow new investment to generate significant tax losses which can then be carried back to generate cash refunds for eligible businesses.

    Eligible corporate 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.

    The amount of the tax offset is limited by the corporate entity’s income tax liabilities in the relevant gain years and its franking account balance at the end of the year in which the entity files its tax return claiming the loss carry back tax offset (the 2020–21 or 2021–22 income year).

    The law commences on 1 January 2021. If eligible, corporate entities can claim the tax offset in their tax returns for the 2020–21 and 2021–22 income years.

    We will provide further guidance on this measure including how to claim the tax offset in the 2020–21 and 2021–22 company tax returns.

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      Last modified: 17 Feb 2021QC 63853