Tradies Accountants | Tradies Bookkeepers

The Government is using stimulus measures to support small businesses and improve their cash flow and part of its efforts is the Loss Carry Back Tax offset, which is basically a tax refund. In the past, you could carry losses forward only but now you can carry them back to offset prior-year tax obligations and get a tax refund for your business. The Loss Carry Back Tax offset benefits businesses that made profits in the past but are now making losses because of COVID-19.

Loss carry back tax offset

Tax losses are generally carried forward only and can’t be applied against the previous year’s profits to lessen an income tax event. The Loss Carry Back Tax Offset allows eligible businesses to carry back losses made in 2020, 2021 and 2022 FYs to offset against tax paid in previous income years up to 2018/19. You can carry back income tax losses only to certain years where you made profits. Eligible businesses must wait until they lodge their 21 or 22 company tax returns before they can claim the tax paid in previous years.

To be eligible for the Loss Carry Back Tax Offset, you must be a company, Public Trading Trust or Corporate Limited Partnership and have an aggregated turnover threshold of no more than $5 b. Note that the Loss Carry Back Tax Offset doesn’t apply to Sole Traders, Trusts and Partnerships.

You can claim the Loss Carry Back Tax Offset if you are an eligible business and made tax losses in the 19/20, 20/21 or 21/22 financial years. You must have an income tax liability for the 18/19, 19/20 or 20/21 financial years. You must have adequate franking credits on your franking account and have met your tax return obligations.

What are the benefits of the Loss Carry Back Tax Offset? You will be able to claim tax losses on previous income year instead of wait for future periods where you’ll earn income to offset losses. You can increase your cash flow by claiming the tax you’ve paid in previous years tax return and get a tax refund.

Tradies Accountants | Tradies Bookkeepers

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