2021 Tax Tips – Loss Carry Back
One of the measures the Federal Government announced to help businesses during COVID was the Loss Carry Back Tax offset.
Normally if you have a tax loss, this can be only offset against future taxable income.
But this Loss Carry Back Tax offset allows eligible business who have experienced a tax loss in the 2020-2021 tax year, to offset this against taxable income in previous selected years. This may then result in a cash refund of tax paid in previous years, or a reduction in the debt you owe the Australian Taxation Office (ATO).
Loss Carry Back – How does it work for the 2020-2021 year?
If you answered yes to all of the above, you may be able to claim the Loss Carry Back Tax offset.
Examples
Set out below are some examples but please make sure you talk to your professional tax advisor to confirm your numbers. especially around any exempt income and the balance of your franking account.
|
Company A |
Company B | Company C | ||
| 1 | Aggregate Revenue | $1 million | $1 million | $1 million |
| 2 | 2020 – 2021 expected tax loss | $50,000 | $100,000 | $200,000 |
| 3 | Taxable Income 2019-2020 | $100,000 | $100,000 | $100,000 |
| 4 | Exempt Income in 2019-2020 | $0 | $0 | $20,000 |
| 5 | Tax rate 2020 – 2021 | 26% | 26% | 26% |
| 6 | Maximum Possible tax offset being (lessor of 2 or 3 less 4) *5 | $13,000 | $26,000 | $20,800 |
| 7 | Franking Account Balance 30 June 2021 | $35,000 | $20,000 | $35,000 |
| 8 | Claimable tax offset (lessor of 6 or 7) | $13,000 | $20,000 | $20,800 |
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