The loss carry-back scheme, explained
/Last year, as businesses suffered mounting losses due to the COVID-19 pandemic, the federal government announced the loss carry-back scheme to assist businesses to recoup some of their losses.
This means eligible businesses can carry-back losses incurred in financial years 2020, 21 and 22 to previous years. The scheme is intended to encourage new investment, which may result in tax losses and a tax refund supporting business cashflow.
Most people think: “great our business can save tax and get a refund!”
Well, maybe not.
The bad news is that many businesses simply don’t qualify because of the way they’re structured, including many of the most common business structures, such as family and unit trusts, general partnerships, and sole traders.
The loss carry-back applies only for an eligible corporate entity that has:
An aggregated turnover of less than $5 billion.
Carry-back losses incurred in financial years 2020, 2021 and 2022 to previously taxed profits in the financial year ended 2019, 2020 or 2021.
a surplus in its franking account.
met all income tax return lodgement obligations.
The good news is that companies are eligible, which means potentially a tax refund, more cashflow, and more opportunity to invest.
The scheme kicked-in at the start of this year, which means your business might be eligible now. Please feel free to get in touch if you’d like to discuss.