Following the 2020-21 budget announcements the government legislated a range of temporary tax incentives to support new investment and increase business cash flow.
The loss carry back regime will temporarily allow eligible corporate tax entities to offset tax losses against previously taxed profits (that is paid tax in relevant previous years) to generate a tax refund (refundable tax offset). This will allow eligible corporate entities to “use” their current losses immediately rather than carry them forward.
Eligible corporate tax entities with an aggregated turnover of less than $5 billion can choose to carry back some or all the tax losses for the 2019-20, 2020-21 or 2021-22 income years to earlier years in which it had income tax liabilities.
They can generally choose to claim a refundable tax offset up to the lesser of:
The amount of tax paid in previous relevant years (that is their income tax liabilities).
Their closing franking account balance for the year that they claim the refundable tax offset.
The amount of eligible tax losses carried back multiplied by their applicable tax rate in the loss year.
The loss carry back offset is a refundable tax offset. Of course, if you choose to carry back some or all your tax loss, you cannot use the amount to claim against future income.
Some losses cannot be carried back. The following losses cannot be carried back:
Net capital losses or
Tax losses that have been transferred under division 170-A transfers of losses within certain wholly owned groups of companies or
Tax losses that have been transferred under sub div 707-A transfers to the head entity of a consolidated group by an entity joining the group or
Excess franking tax offsets which have been converted into tax losses.
Company Tax return - New labels at item 13 relating to Loss Carry Back.
Label U - Tax losses carried forward to later income years. This is not a new label but impacted by new labels A, B and C.
Label A - Tax loss 2019-20 carried back to 2018-19
Label B - Tax loss 2020-21 carried back to 2018-19
Label C - Tax loss 2020-21 carried back to 2019-20 - Some losses cannot be carried back
Label G - Tax rate 2019-2020 - The tax rate you used to calculate tax liability. (Only complete if applicable)
Label I - Net exempt income 2018-2019
Label J - Net exempt income 2019-2019
Losses information - continued
Label L – Income tax liability 2018-19
Label M - Income tax liability 2019-20
Label O - Aggregated turnover 2019-20. Select your aggregate turnover range. Only complete Labels O and P if you have made the choice to carry back a loss from the 2019-20 income year.
Label P - Aggregated turnover Actual aggregated turnover rounded to the nearest $100 million if you are a significant global entity or category P (aggregated turnover $1 billion or over) selected at O.
Label S - Loss carry back offset.
Use the suggested method from: www.ato.gov.au/Business/Loss-carry-back-tax-offset to calculate your loss carry back tax offset. This is a 4-step process and enter the result at S and include this amount at E in the calculation statement.
Note: The Electronic Lodgment fields below, are not required and need to be left blank.
