One of the more significant measures in the 2026 Federal Budget is the reintroduction of loss carry-back for eligible companies. From 1 July 2026 — just weeks away — companies that were profitable in recent years but are now facing losses will have a new option for recovering some of the tax they previously paid.
What is loss carry-back?
Under normal Australian tax rules, if a company makes a loss, that loss is carried forward and used to offset future profits. This makes sense in principle — you don’t pay more tax than you should over the long run — but it can create a significant cash flow problem for companies that paid substantial tax in profitable years and are now struggling.
Loss carry-back turns this around. Instead of waiting for future profits to absorb a current loss, eligible companies can carry the loss back against tax they have already paid in up to two prior years — and receive a refund.
Who is eligible?
To access loss carry-back, a company must have aggregated annual global turnover of less than $1 billion, a revenue loss (not a capital loss) in the current year from 1 July 2026 onwards, and a positive franking account balance. The refund is limited to the amount of credits sitting in the company’s franking account, which ensures that companies can only recover tax that was genuinely paid at the corporate rate.
A practical example
Imagine a company that paid $200,000 in company tax in 2024–25, and then makes a $500,000 revenue loss in 2026–27. Under the old system, those losses would simply be carried forward to reduce tax on future profits — whenever those arrive. Under loss carry-back, the company could offset some or all of that loss against the $200,000 of tax paid in 2024–25 and receive a cash refund — subject to the franking account balance. That is real cash back into the business when it needs it most.
Why this matters right now
Economic conditions have been uneven across industries. For some businesses, recent years brought solid profitability followed by a more difficult period. Loss carry-back is specifically designed for this situation — companies that have a track record of paying tax, have hit a rough patch, and deserve access to some of that tax back rather than simply waiting.
This measure was previously available in Australia as a temporary COVID-19 response measure. Its reintroduction under this Budget is intended to be permanent for eligible companies.
Get in touch with us to work out whether your company qualifies for loss carry-back — and to plan your tax position for the 2026–27 year.
