Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) The amount of the entity's * loss carry back tax offset for the * current year is the lesser of the following amounts:
(a) the sum of the * loss carry back tax offset components for:
(i) the 2018 - 19 income year; and
(ii) the 2019 - 20 income year; and
(iii) if the current year is the 2021 - 22 income year--the 2020 - 21 income year; and
(iv) if the current year is the 2022 - 23 income year--the 2021 - 22 income year and the 2020 - 21 income year;
(b) the entity's * franking account balance at the end of the current year.
Meaning of loss carry back tax offset component
(2) For the purposes of working out the amount of the entity's * loss carry back tax offset for the * current year, the entity's loss carry back tax offset component for an income year is:
(a) if the entity does not, in its * loss carry back choice for the current year, * carry back any * tax losses to the income year--nil; or
(b) otherwise--so much of the entity's * income tax liability for the income year as does not exceed:
(i) if, in its loss carry back choice for the current year, the entity carries back only one tax loss to the income year--the amount worked out at step 3 of the following method statement in relation to the tax loss; or
(ii) if, in its loss carry back choice for the current year, the entity carries back tax losses for 2, 3 or 4 * loss years to the income year--the sum of the amounts worked out at step 3 of the following method statement in relation to each of those tax losses.
Method statement
Step 1. Start with the amount of the * tax loss the entity * carries back to the income year.
Step 2. Reduce the step 1 amount by the entity's * net exempt income for the income year.
Note: Do not reduce the step 1 amount by the entity's net exempt income to the extent the net exempt income has already been utilised: see section 960 - 20.
Step 3. Multiply the step 2 amount by the * corporate tax rate for the * loss year.
Example: Company A (which is not a base rate entity) has at the end of the 2020 - 21 income year:
(a) a tax loss of $900,000 for that year and a franking account balance of $280,000; and
(b) for the 2018 - 19 income year--an income tax liability of $120,000 and net exempt income of $5,000; and
(c) for the 2019 - 20 income year--an income tax liability of $210,000.
Company A chooses to carry back $405,000 of its tax loss for the 2020 - 21 year to the 2018 - 19 year and $495,000 of that loss to the 2019 - 20 year.
Company A's loss carry back tax offset for the 2020 - 21 year is $268,500, worked out as follows:
(a) an offset component for the 2018 - 19 income year of $120,000, calculated by starting with the $405,000 carried back, reducing that at step 2 by $5,000, and multiplying the result by 30%;
(b) an offset component for the 2019 - 20 income year of $148,500, calculated by starting with the $495,000 carried back and multiplying the result by 30%.
The sum of the 2 components is $268,500 (which is less than Company A's $280,000 franking account balance at the end of the 2020 - 21 year). If that sum had exceeded that balance, the amount of the offset would have been limited under paragraph (1)(b) of this section to that balance.
Income tax liability for the 2018 - 19 or 2019 - 20 income year already utilised--entitlement to loss carry back tax offset for 2021 - 22 income year
(3) Subsection (4) applies in relation to applying paragraph (2)(b) to work out the entity's * loss carry back tax offset component for the 2018 - 19 or 2019 - 20 income year (the gain year ) as part of working out the entity's entitlement to a * loss carry back tax offset for the 2021 - 22 income year.
(4) Disregard so much of the entity's * income tax liability for the gain year as has previously been included (as part of working out the entity's entitlement to a * loss carry back tax offset for the 2020 - 21 income year) in a * loss carry back tax offset component.
Income tax liability for the 2018 - 19, 2019 - 20 or 2020 - 21 income year already utilised -- entitlement to loss carry back tax offset for 2022 - 23 income year
(4A) Subsection (4B) applies in relation to applying paragraph (2)(b) to work out the entity's * loss carry back tax offset component for the 2018 - 19, 2019 - 20 or 2020 - 21 income year (the gain year ) as part of working out the entity's entitlement to a * loss carry back tax offset for the 2022 - 23 income year.
(4B) Disregard so much of the entity's * income tax liability for the gain year as has previously been included (as part of working out the entity's entitlement to a * loss carry back tax offset for the 2020 - 21 or 2021 - 22 income year) in a * loss carry back tax offset component.
Foreign residents
(5) Paragraph (1)(b) does not apply if the entity was a foreign resident (other than an * NZ franking company) for:
(a) if the entity * carries back an amount to the 2018 - 19 income year--more than half of the 2018 - 19 income year; and
(b) if the entity carries back an amount to the 2019 - 20 income year--more than half of the 2019 - 20 income year; and
(c) if the * current year is the 2021 - 22 income year and the entity carries back an amount to the 2020 - 21 income year--more than half of the 2020 - 21 income year; and
(d) if the current year is the 2022 - 23 income year:
(i) where the entity carries back an amount to the 2021 - 22 income year--more than half of the 2021 - 22 income year; and
(ii) where the entity carries back an amount to the 2020 - 21 income year--more than half of the 2020 - 21 income year.
Table of sections
160 - 15 Loss carry back choice
160 - 16 Changing a loss carry back choice
160 - 20 Entity must have had turnover less than $5 billion for loss year
160 - 25 Entity must have been a corporate tax entity during relevant years
160 - 30 Transferred tax losses, income tax liabilities etc. not included
160 - 35 Integrity rule--no loss carry back tax offset if scheme entered into