The same legislation brings back loss carry back for companies, this time as a permanent feature rather than a temporary measure.  

What it does 

Normally a company that makes a tax loss carries it forward and waits for future profits to use it. Loss carry back lets the company look backwards instead, applying the loss against tax it has already paid and receiving a refundable tax offset. 

If your company makes a tax loss in an income year starting on or after 1 July 2026, so the 2026-27 year onwards, it can carry that loss back against tax paid in either or both of the two previous years. 

How much you actually get back 

Three things set the size of the refund. You get whichever is smallest. 

The loss itself. The offset is broadly the loss multiplied by the company tax rate for the loss year. A $200,000 loss at 25% is worth $50,000, however profitable the earlier years were. 

The earlier years. The company needs to have had an income tax liability in one or both of the two previous years. The loss is carried back against the taxable income of those years, so if there was no tax liability there is nothing to carry it back against. 

The franking account. The offset is capped at the company’s franking account balance at the end of the loss year. Tax that has already been passed out to shareholders as franked dividends cannot be claimed back a second time. 

Putting those together, say the company paid $100,000 of tax over the two earlier years then declared franked dividends that used $70,000 of those credits. That leaves $30,000 in the franking account. A $200,000 loss would otherwise support a $50,000 refund, but $30,000 is the ceiling. The unused part of the loss is still available to carry forward against future profits in the usual way. 

The franking account is the one that tends to catch people out, because it turns on dividend decisions made in earlier years. It is worth thinking about before the dividends go out rather than after. 

Two other points. The rules apply to revenue losses only, not capital losses. They also only apply to companies, so losses in a trust or in your own name are not affected. There are also conditions around having your returns lodged and formally choosing to claim the offset in the loss year, which we would work through with you at the time. 

Key takeaway 

Nothing is claimable yet, because the first eligible loss year is 2026-27. What matters now is knowing the option exists. If your company has had a couple of profitable years then hits a weaker one, discuss options with your accountant during tax planning, because loss carry back can turn that loss into cash now rather than a deduction you use years down the track.