Australia: Guidance on reintroduced loss carry back tax offset

The Australian Taxation Office (ATO) published guidance relating to the eligibility criteria and limits of the reintroduced loss carry back tax offset under Treasury Laws Amendment (Tax Reform No. 2) Act 2026, effective for income years starting on or after July 1, 2026.

Through the offset, corporate tax entities that are not a significant global entity, will be able to:

• Carry back a tax loss and offset it against tax they have paid in either or both the two previous income years
• May be able to carry forward unutilized tax losses to a later income year

To be eligible, the corporate tax entity must meet all the following conditions:

• 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 two income years
• Have filed, or not been required to file, tax returns for the previous five income years
• Have a franking account balance at the end of the current income year
• Choose to carry back the loss in its company tax return

The amount an eligible corporate tax entity can claim in the loss carry back tax offset is limited by:

• Amount worked out under the loss carry back rules
• Balance of the entity's franking account at the end of the current year