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Carrying back losses

As part of the federal Government’s JobMaker Plan, announced in the budget, eligible companies will temporarily be able to carry back tax loss. This measure enables those businesses that have losses during COVID-19 and the recovery period to offset that loss against prior profits, thus receiving a tax refund from the 2018/19 income year onwards. This is an optional offset, and applies to the 2019/20, 2020,21 and 2021/22 financial years

Who does it apply to

         • company

         • corporate limited partnership, or

         • public trading trust.

Eligibility

  • Turnover of less than $5b.
  • Turnover includes associated entities.
  • The normal loss integrity rules still apply.
  • The entity must have lodged their tax returns for the current year and each of the five years immediately preceding it to be entitled to the offset.

Loss carry-back tax offset rules

When using the offset the entity must use the tax rate from the loss year. i.e. if the entity has a tax rate of 27.5% for 2020 but had a tax rate of 30% in 2019 they use the tax rate of 27.5% to calculate the offset.

The offset only applies to revenue losses, not capital losses.

The loss carry-back tax offset also cannot exceed the:

         • the previously paid tax, and

         • the balance of the entity’s franking account at the end of the income year in which the offset is being claimed.

source CCH iKnow