This proposal looks at allowing “Eligible” companies to carry tax losses back against prior years taxable income as long as certain criteria is met. Under this proposal which is expected to be applicable from the 2012-2013 tax year, if you make a tax loss in 2013 (up to a limit of $1m), this loss can be used to offset taxable income declared in the 2012 year. For 2014 and onwards, you can offset up to $1m of tax losses in the current year against 2 years prior taxable income. So you can potentially claim a tax offset of up to a maximum $300K in a year for tax paid in previous years.

Certain criteria must be met and some of those criteria include:

• Has to have unutilised tax losses

• Does not apply to capital losses

• The company has to have all relevant years’ tax returns up to date and lodged

• Has to have relevant value of franking credits to offset this refund of tax  – E.g. you may have paid company tax in a particular year, but you may have paid dividends which passes the available franking credits to the shareholders, thus there are no longer any franking credits to refund via a tax refund.

• You can not choose to carry back a loss where the company fails to satisfy the continuity of ownership/same business test. Only losses obtained in the period of same ownership/same business can be carried back to profits earned under that same ownership/ same business. 

For example, company XYZ Pty Limited had the following income results:

Note that no interest will be paid by the ATO on the refund of the tax paid in previous years that is refunded in later years under this proposal.



In the past, any tax losses were carried foward each year and quarantined until you had profit to offset the losses. This new proposal at least allows you to claw back some of the company tax you may have paid in earlier years.



If you would like to find out more about how Loss Carry Back, click here to contact Cherie Tracey, our Client Service Manager for more information.