Australia’s corporate tax loss carry-back regime is now in effect, allowing eligible entities to claim a refundable tax offset for current-year losses against tax paid in either or both of the two preceding income years.
The Australian Tax Office (ATO) has confirmed on 8 September 2026 that legislation enabling corporate tax entities to carry back losses against prior-year tax payments is now law. The mechanism, introduced in the 2026–27 Budget, became operational for income years beginning 1 July 2026.
How the refundable tax offset works
Corporate tax entities meeting strict eligibility criteria can offset current-year tax losses against tax paid in either or both of the two preceding income years, receiving a refundable tax offset rather than carrying forward unused losses to future periods. This structure helps cash-flow-constrained profitable businesses that later record losses. The Australian Taxation Office confirms that the first claims under this provision will appear on 2026–27 tax returns.
Eligibility requirements
Five conditions apply simultaneously. The entity must be classified as a corporate tax entity (companies, limited trusts, certain partnerships), must not be a significant global entity, must have generated a tax loss of a revenue nature in the current income year, must have paid tax in at least one of the prior two years, and must have lodged (or been exempted from lodging) tax returns for the previous five income years. The entity’s franking account must carry a positive balance at financial year-end.
The refundable offset amount cannot exceed the lower of the loss carry-back calculation or the franking account balance as at year-end.
Entities considering this election should verify eligibility and retain supporting documentation before lodgement.
Earlier, the Australian Senate approved the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 on 19 August 2026, following its passage by the House of Representatives on 18 August 2026. One of the key measures under the legislation provided eligible corporate tax entities with a refundable tax offset by allowing them to carry back tax losses to earlier profitable income years.
