On 6 October 2020, the Government announced the Loss Carry Back Scheme. Eligible corporate entities that previously paid corporate income taxes 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 will allow new investment to generate significant tax losses which can then be carried back to generate cash refunds for eligible businesses.
Eligible 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 financial years to a prior financial year's income tax liability in the 2018–19, 2019–20 and 2020–21 financial years.
The amount of the refund 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 financial year).
The law commenced on 1 January 2021. If eligible, corporate entities can claim the tax offset in their tax returns for the 2020-21 and 2021-22 income years.
As part of the 2021–22 federal Budget, the Australian Government announced it will extend the loss carry-back measure by one year.
Further guidance on this measure including how to claim the tax offset is included in the relevant company tax returns.