The temporary loss carry-back rules were a welcome announcement by the Government in the Federal Budget handed down on 6 October 2020. These rules are designed to provide temporary cashflow support to companies that were previously in a tax paying position but who now find themselves in a tax loss position due to the COVID-19 pandemic and/or through obtaining faster deductions for depreciation under the new instant asset write-off measures.
The business support that can be offered by the loss carry-back rules is to monetise the value of revenue losses generated by companies, rather than deferring this until when a company returns to profitability and a taxpaying position.
In the 2021-22 Federal Budget, the Government announced it would be extended for an additional year.
A choice to carry-back losses must be made by the day on which the company lodges its tax return for the year in which the offset is claimed, subject to additional time being allowed by the Commissioner of Taxation. It is expected that the annual company tax return will be the approved form to make the loss carry-back choice.