Loss Carry-Back Tax Offset – Why planning before 30 June is so important to this year and future years

By Chris Smith

On 6th October the Government released the Federal Budget for 2020/21.

A key announcement is the Loss Carry-Back Tax Offset that allows tax losses incurred in FY 2020, FY 2021, and FY 2022 to be offset against tax profits in FY 2019, FY 2020 and FY 2021.


  • Only applies to companies
  • The offset cannot exceed the available franking credits
  • Different tax rates for applying to loss years will impact the $ value of the credit available

Tax Planning – Why it is so important for the Loss Carry-Back Tax Offset:

  • Interaction with the Temporary Full Expensing of Depreciating Assets may mean you are eligible for this offset even though the business is otherwise trading profitably
  • Franking credits are required to access the offset:
    • Critical to review current franking account balance
    • Review dividends that will be declared at 30 June for profit share / remuneration purposes
    • Review dividends required for Div 7A loan repayments
  • Implications of depleting franking credits for FUTURE dividends – may not be in the shareholders’ best interests to access the loss carry-back (this is particularly IMPORTANT when dividends are used to repay Div 7A loans as it would be a terrible outcome to have unfranked dividends in future years)
  • Review and adjust Director remuneration strategy (for example, is a salary this year preferable to dividend profit share?) – consider the impact on both the loss AND franking credits
  • Are you taking advantage of other strategies to maximise tax deductions in FY 2021 that will increase your eligibility for the Loss Carry-Back Tax Offset?


For more information on the planning opportunities, please contact our office on (08) 6212 7200 to discuss further.