Tax loss carry back law now passed

Eligible corporate tax entities can claim a refundable tax offset in 2026–27 tax returns to help with their cashflow.

The reintroduction of the loss carry back tax offset that was announced by the Australian Government in the 2026–27 Budget is now law. If you’re a corporate tax entity, that is not a significant global entity, you:

• will be able to carry back a tax loss and offset it against tax you’ve paid in either or both the 2 previous income years

• may be able to carry forward unutilised tax losses to a later income year.

A corporate tax entity is one that’s taxed as a company. This includes companies, limited trusts and some partnerships.

The law change is intended to help with cashflow and resilience. So, if you’ve paid tax during profitable years and then make a loss, you may be able to claim some of that tax back. Instead of waiting to use the loss against future profits, you may receive a refundable tax offset.

The changes apply to income years starting on or after 1 July 2026. If you're eligible, you'll first be able to claim the refundable tax offset in your 2026–27 tax return.

To be eligible, you must meet all the following conditions:

• be a corporate tax entity

• not be a significant global entity

• have a tax loss (revenue in nature) in the current income year

• have paid tax in one or both previous 2 income years

• have lodged, or not been required to lodge, tax returns for the previous 5 income years

• have a franking account balance at the end of the current income year

• choose to carry back the loss in your company tax return.

There are limits on the amount that you can claim. The loss carry back tax offset is limited by:

• amount worked out under the loss carry back rules

• balance of your franking account at the end of the current year.

If you’re considering using this tax offset, ensure you meet the eligibility requirements and keep appropriate records ready for when you lodge your tax return.

Source ATO QC108008