Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 160 - Corporate loss carry back tax offset for 2020-21 or 2021-22 for businesses with turnover under $5 billion  

Subdivision 160-A - Entitlement to and amount of loss carry back tax offset  

SECTION 160-10   Amount of loss carry back tax offset  

160-10(1)  
The amount of the entity ' s *loss carry back tax offset for the *current year is the lesser of the following amounts:

(a)  the sum of the *loss carry back tax offset components for:


(i) the 2018-19 income year; and

(ii) the 2019-20 income year; and

(iii) if the current year is the 2021-22 income year - the 2020-21 income year;

(b)  the entity ' s *franking account balance at the end of the current year. Meaning of loss carry back tax offset component

160-10(2)  
For the purposes of working out the amount of the entity ' s *loss carry back tax offset for the *current year, the entity ' s loss carry back tax offset component for an income year is:

(a)  if the entity does not, in its *loss carry back choice for the current year, *carry back any *tax losses to the income year - nil; or

(b)  otherwise - so much of the entity ' s *income tax liability for the income year as does not exceed:


(i) if, in its loss carry back choice for the current year, the entity carries back only one tax loss to the income year - the amount worked out at step 3 of the following method statement in relation to the tax loss; or

(ii) if, in its loss carry back choice for the current year, the entity carries back tax losses for 2 or 3 *loss years to the income year - the sum of the amounts worked out at step 3 of the following method statement in relation to each of those tax losses.
Method statement

Step 1.

Start with the amount of the *tax loss the entity *carries back to the income year.


Step 2.

Reduce the step 1 amount by the entity ' s *net exempt income for the income year.

Note:

Do not reduce the step 1 amount by the entity ' s net exempt income to the extent the net exempt income has already been utilised: see section 960-20 .


Step 3.

Multiply the step 2 amount by the *corporate tax rate for the *loss year.

Example:

Company A (which is not a base rate entity) has at the end of the 2020-21 income year:

  • (a) a tax loss of $900,000 for that year and a franking account balance of $280,000; and
  • (b) for the 2018-19 income year - an income tax liability of $120,000 and net exempt income of $5,000; and
  • (c) for the 2019-20 income year - an income tax liability of $210,000.
  • Company A chooses to carry back $405,000 of its tax loss for the 2020-21 year to the 2018-19 year and $495,000 of that loss to the 2019-20 year.

    Company A ' s loss carry back tax offset for the 2020-21 year is $268,500, worked out as follows:

  • (a) an offset component for the 2018-19 income year of $120,000, calculated by starting with the $405,000 carried back, reducing that at step 2 by $5,000, and multiplying the result by 30%;
  • (b) an offset component for the 2019-20 income year of $148,500, calculated by starting with the $495,000 carried back and multiplying the result by 30%.
  • The sum of the 2 components is $268,500 (which is less than Company A ' s $280,000 franking account balance at the end of the 2020-21 year). If that sum had exceeded that balance, the amount of the offset would have been limited under paragraph (1)(b) of this section to that balance.

    Income tax liability for the 2018-19 or 2019-20 income year already utilised

    160-10(3)  
    Subsection (4) applies in relation to applying paragraph (2)(b) to work out the entity ' s *loss carry back tax offset component for the 2018-19 or 2019-20 income year (the gain year ) as part of working out the entity ' s entitlement to a *loss carry back tax offset for the 2021-22 income year.

    160-10(4)  
    Disregard so much of the entity ' s *income tax liability for the gain year as has previously been included (as part of working out the entity ' s entitlement to a *loss carry back tax offset for the 2020-21 income year) in a *loss carry back tax offset component. Foreign residents

    160-10(5)  
    Paragraph (1)(b) does not apply if the entity was a foreign resident (other than an *NZ franking company) for:

    (a)  if the entity *carries back an amount to the 2018-19 income year - more than half of the 2018-19 income year; and

    (b)  if the entity carries back an amount to the 2019-20 income year - more than half of the 2019-20 income year; and

    (c)  if the *current year is the 2021-22 income year and the entity carries back an amount to the 2020-21 income year - more than half of the 2020-21 income year.


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