In brief
Carry back tax loss measures for certain businesses are reintroduced as well as limited new tax loss refundability for certain start-ups.
Key takeaways
For tax years commencing on or after 1 July 2026, companies with aggregated annual global turnover of less than AUD 1 billion will be able to carry back tax losses and offset against tax paid up to two years earlier.
For tax years commencing on or after 1 July 2028, start-up companies with aggregated annual turnover of less than AUD 10 million that generate a tax loss in their first two years of operation will be able to generate a refundable tax offset by using the loss.
Small businesses and start-ups should consider their investment and growth strategies in light of these newly available tax measures.
In more detail
Reintroduction of loss carry back
Loss carry back tax offsets were previously allowed from the 2019-20 to 2022-23 income years as part of the Federal Government’s COVID-19 relief.
This year’s budget reintroduces loss carry back for tax years commencing on or after 1 July 2026. It will allow companies with aggregated annual global turnover of less than AUD 1 billion to carry back a tax loss and offset it against tax paid up to two years earlier.
Loss carry back will apply to revenue losses only, not capital. They will also be limited by a company’s franking account balance. If implemented in a manner similar to the COVID-19 loss carry back measures, the loss carry back will be limited by the company’s franking account balance at the end of the year in which the offset is claimed.
Treasury expects this to decrease receipts by AUD 2.3 billion over the five years from 2025-26.
Introduction of loss refundability for small start-up companies
For tax years commencing on or after 1 July 2028, start-up companies with aggregated annual turnover of less than AUD 10 million that generate a tax loss in their first two years of operation will be able to utilise the loss to generate a refundable tax offset.
The offset will be limited to the value of fringe benefits tax and withholding tax on wages paid in respect of Australian employees in the loss year.
Treasury expects this to increase administered payments by AUD 410 million over the five years from 2025-26.
A copy of the Federal Budget papers can be found here.
Jeremy Hyman, Head of Communications, and Sky Friend, Business Development Consultant, have contributed to this legal update.