Main Insights
Loss carry-back made permanent from 1 July 2026, enabling refunds on losses offset against prior two years’ tax paid.
Expanded eligibility includes foreign-owned companies with turnover below $1 billion.
Refunds capped at tax paid, limited to revenue losses, subject to franking and filing rules.
Australia will permanently expand and reinstate loss carry-back from 1 July 2026, allowing eligible companies to offset recent tax losses against prior-year tax and receive immediate cash refunds.
The recent Federal Budget announcement revealed that Australia will broaden eligibility for loss carry-back to companies, including foreign-owned entities, with aggregated turnover below $1 billion from the 2026-2027 income year and make the regime permanent. Companies will be able to apply current-year tax losses against taxable profits from the two preceding income years, generating refunds of tax already paid.
The policy replaces the temporary COVID-era measure and embeds loss carry-back within Australia’s corporate tax framework. Government estimates place eligibility at about 85,000 companies, including a significant number of foreign-owned subsidiaries operating locally.
Refunds are capped at tax previously paid and constrained by franking account balances, which record tax credits available for shareholder distribution. Only revenue losses qualify. Capital losses are excluded. Companies must have lodged prior-year tax returns and remain below the turnover threshold in the loss year to access the regime.
Loss carry-back operates alongside existing carried-forward loss provisions, which offset future taxable income. The carry-back mechanism delivers immediate cash refunds based on prior tax payments.
Businesses are expected to reassess forecasts, impairment decisions and prior-year tax positions ahead of implementation to quantify cashflow effects.
Last updated: 15th May 2026
About the Author
Aaron Garry is the Managing Director of ABN Australia, where he leads the firm’s strategic growth and client service delivery. A Chartered Accountant with deep local and international experience, Aaron has supported hundreds of global businesses in establishing and growing their presence in Australia. His expertise spans market entry, compliance, and commercial advisory.
Aaron Garry
Managing Director