As part of the 2020–21 Budget, the government announced that it will provide 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.
This initiative will interact with the government’s temporary full expensing of assets to encourage spending and investment as it will allow new investments to generate significant tax losses; which in turn can be carried back to generate cash refunds for eligible businesses.
Corporate entities with less than $5 billion turnover in a relevant loss year can carry back losses made in the 2019–20, 2020–21 and 2021–22 income years to a prior year’s income tax liability in the 2018–19, 2019–20 and 2020–21 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 (the 2020–21 or 2021–22 income year).
If eligible, corporate entities can claim the tax offset in their tax returns for the 2020–21 and 2021–22 income years.
Claiming carry back losses
If you could like to take advantage of this federal budget initiative, speak with your accountant as they will provide an assessment on your turnover and previous year liabilities to ensure this scheme is eligible to you.
How can Walsh Accountants help you?
Claiming carry back losses is just one of many exciting tax planning strategies that you could take advantage of before the new financial year.
Engage with our team before 15 June 2021 to have your tax plan prepared by one of our expert Accountants.