Changing a loss carry back choice
On 7 December 2021, the proposed amendment under the Treasury Laws Amendment Act 2021 (2021 Measures No. 5) to allow a loss carry back choice to be changed became law. An entity wanting to change a loss carry back choice must notify the Commissioner of Taxation using an approved form within the limited amendment period.
Loss carry back extension
On 11 May 2021, as part of the 2021–22 federal BudgetExternal Link, the Australian Government announced it will extend the loss carry back measure. The extension will allow eligible corporate entities to carry back tax losses from the 2022–23 income year to offset previously taxed profits as far back as the 2018–19 income year when they lodge their 2022–23 tax return.
This extension became law on 22 February 2022.
Loss carry back
On 6 October 2020 as part of the 2020–21 federal Budget, the Australian 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 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, 2021–22 and 2022–23 income years to a prior year's income tax liability in the 2018–19, 2019–20, 2020–21 and 2021–22 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 (that is, in the 2020–21, 2021–22 or 2022–23 income year).
The law commenced on 1 January 2021. If eligible, corporate entities can claim the tax offset in their tax returns for the 2020–21, 2021–22 and 2022–23 income years.
Further guidance on this measure including how to claim the tax offset is included in the relevant company tax returns.
How eligible corporate entities can claim the temporary loss carry back measure into the 2022–23 income year.