Loss carry back tax offset
Loss carry back provides a refundable tax offset that eligible corporate entities can claim:
▶ after the end of their 2020–21 and 2021–22 income years
▶ in their 2020–21 and 2021–22 company tax returns.
Eligible entities get the offset by choosing to carry back losses to earlier years in which there were income tax liabilities. The offset effectively represents the tax the eligible entity would save if it was able to deduct the loss in the earlier year using the loss year tax rate. As it is a refundable tax offset, it may result in a cash refund, a reduced tax liability or a reduction of a debt owing to the ATO.
The eligible entity does not need to amend the earlier income years to claim the offset. If an entity does not choose to carry back a loss, the loss may be carried forward to use in a later income year. Loss carry back is intended to interact with temporary full expensing, encouraging new investment which may result in tax losses. Where the choice to carry back tax losses results in a tax refund, this will increase business cash flow.
Eligibility for the tax offset
You must meet the eligibility requirements to choose to carry back the loss and claim the tax offset. You can claim the tax offset if you:
▶ are an eligible entity
▶ made tax losses in the 2019–20, 2020–21 or 2021–22 income years
▶ had an income tax liability for the 2018–19, 2019–20 or 2020–21 income years
▶ have a surplus in your franking account at the end of the income year that you are claiming the tax offset
▶ have met your tax return lodgment obligations.
Eligible entities
You are an eligible corporate entity if you are both a:
▶ company, corporate limited partnership or a public trading trust throughout
> the income year that you are claiming the tax offset
> the income year you choose to carry the loss back to (ignoring any part of the year before you existed)
> any income years in between
▶ small business entity in the loss year or would have been a small business entity if the aggregated turnover threshold was $5 billion.
The rules for calculating aggregated turnover are the same as those used for the small business entity concessions. Your aggregated turnover may include the annual turnover of other business entities, in addition to your own annual turnover.
Tax losses and tax liabilities
You can only carry back certain tax losses to certain income years for which you have an income tax liability.
Tax losses
You can only carry back tax losses made in the 2019–20, 2020–21 or 2021–22 income years. You cannot carry back:
▶ capital losses
▶ certain tax losses arising from the conversion of excess franking offsets
▶ transferred losses relating to either
> foreign banking groups (Division 170 of the Income Tax Assessment Act 1997 (ITAA 1997))
> head companies of consolidated groups (Subdivision 707-A of the ITAA 1997).
Tax liabilities
You can carry back losses to the 2018–19, 2019–20 or 2020–21 income year if you were liable to pay income tax for that year.
Check your eligibility
The following table shows which income year your tax loss must be made in and which income year you can carry that loss back to.
| Tax liability in the income year | Tax loss made in 2018–19 or prior income years | Tax loss made in 2019–20 income year | Tax loss made in 2020–21 income year | Tax loss made in 2021–22 income year |
|---|---|---|---|---|
| 2018–19 | n/a | Can carry the 2019–20 loss back to the 2018–19 income year | Can carry the 2020–21 loss back to the 2018–19 income year | Can carry the 2021–22 loss back to the 2018–19 income year |
| 2019–20 | Not eligible | n/a | Can carry the 2020–21 loss back to the 2019–20 income year | Can carry the 2021–22 loss back to the 2019–20 income year |
| 2020–21 | Not eligible | Not eligible | n/a | Can carry the 2021–22 loss back to the 2020–21 income year |
Franking account surplus
The amount of tax offset available is limited to your franking account surplus on the last day of the income year for which you claim it.
Lodgment obligations
To claim the tax offset for an income year, you must both:
▶ lodge your tax return for that income year
▶ have lodged for the previous five income years.
If you have not lodged for any of those income years, you may still be able to claim the tax offset if for those years, either:
▶ ATO assessed your income tax liability
▶ you were not required to lodge a tax return.
How to claim the tax offset
You cannot claim the tax offset in your Company tax return 2020 for a tax loss made in the 2019–20 income year. You will be able to claim the tax offset in your Company tax return 2021 or Company tax return 2022.
Claiming the tax offset is optional. To the extent you choose not to carry back the losses, you may be able to carry them forward to a future income year.
If you want to claim the tax offset for an income year, you will need to make the loss carry back choice by the time you lodge your company tax return for that year. When making the choice, you will also need to specify the amount of tax loss you choose to carry back.
Form to claim the tax offset
If you are lodging your Company tax return 2021:
▶ on or after 1 July 2021 – you can choose to carry back a loss and claim the tax offset in your company tax return for that income year. The Company tax return 2021 form will have the additional labels you will need to complete
▶ before 1 July 2021
Check which form to use to claim the tax offset
| Your 2020–21 income year ends | Before 30 June 2021 | Before 30 June 2021 | On or after 30 June 2021 | On or after 30 June 2021 |
|---|---|---|---|---|
| Are you required to lodge a company tax return for a part year? | Yes | No | Yes | No |
| If you are lodging your company tax return before 1 July 2021, use: | 2020–21 early balancer substituted accounting period claim form | 2020–21 early balancer substituted accounting period claim form | 2020–21 early balancer substituted accounting period claim form | n/a |
| If you are lodging your company tax return on or after 1 July 2021, use: | Company tax return 2021 form | Company tax return 2021 form | Company tax return 2021 form | Company tax return 2021 form |