Loss Carry Back – Cash refunds to assist business economic recovery | Federal Budget 2020-21 Considerations
Tax Law - 07 Oct 2020
The Government has introduced specific loss carry-back measure to provide Australian businesses cash flow relief in the current economic environment.
Companies that have an aggregated annual turnover up to $5 billion are now able to carry-back losses and claim a refundable tax offset for taxes paid on previous profits. This has been introduced to promote economic recovery and ensure employment stability and retention.
Losses incurred in the 2019-20, 2020-21 and 2021-22 financial years, that previously would have been used to reduce future taxable profits, are now available to:
1. Offset taxable profits from 1 July 2018, due to the retrospective operation of the rules.
2. Generate a cash refund, rather than a reduction of income tax payable, to enable entities to continue trading.
3. Be accessible in 2021 and 2022 company tax returns.
This is an opportunity for businesses that will be incurring losses due to the impacts of COVID-19 to take advantage of previous year profits and obtain a present-day cash boost (albeit not available until at least 1 July 2021), including additional opportunities for profitable companies that have claimed the Research and Development Tax Incentive (RDTI).
Co-written by Ally Evans & Chelsea Fennell
The information contained in this blog is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. In all cases, you should consult with a professional advisor familiar with your factual situation for advice concerning specific matters before making any decisions. By reading this blog, you confirm your understanding of this disclaimer.