Reintroduction of the loss carry-back regime (May Federal Budget 2026)

The Government will reintroduce the loss carry-back regime for most businesses and start-ups “to encourage investment and improve resilience through temporary shocks”. From 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able 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 and will be limited by a company’s franking account balance.

This measure is expected to directly benefit up to 85,000 companies each year.

The loss carry-back was originally introduced as a part of the 2020 Budget and eligible companies could carry back tax losses from the 2019–2020, 2020–2021 and 2021–2022 income years against previously taxed profits from the 2018–2019 income year or later. The 2021 Budget then extended temporary loss carry-back by one year. After that extension, eligible companies could also carry back 2022–2023 tax losses, again against taxed profits from 2018–2019 or later.