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  • Avoid mistakes when claiming loss carry back

    We have noticed some common errors with recent claims for loss carry back (LCB).

    To prevent these mistakes and ensure we can process your client's company tax return as quickly as possible, review their records carefully when calculating their tax offset and completing the LCB labels. You can also take the following tips into consideration:

    • Correctly calculate the tax offset – To calculate the tax offset you need to use your client's tax rate in the income year in which they made the loss. For example, generally a base rate entity carrying back a tax loss made in the 2020–21 income year should use the base rate entity company tax rate for the 2020–21 income year, which is 26%.
    • Use the correct income tax liability amount – The amount of your client's tax offset cannot exceed their income tax liability for the income year they are carrying the loss back to. This is the amount at label T5 Tax payable in the calculation statement of your client's company tax return for that year.
    • Get the franking account balance right – The amount of your client's tax offset cannot exceed their franking account closing balance at the end of the claim year. We recommend a review of your client's franking account is undertaken prior to lodging their company tax return.
    • Complete all mandatory labels – If you are claiming LCB, it's important that you complete all of the required LCB labels in item 13 as well as the opening and closing franking account balance labels in item 8 of your client's company tax return. Use our company tax return instructions to help work out which labels you need to complete.

    We will update our website as we notice new common errors being made.

    If you think you have made a mistake on a client's company tax return that has already been lodged, you can contact us.

    See also:

    Last modified: 03 Aug 2021QC 66535