By Joshua Occhino, Co-founder, Ezyiah
Short answer: Yes. Loss carry-back is law again. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026 received Royal Assent on 26 August 2026. Corporate tax entities with aggregated annual global turnover under $1 billion can carry back a revenue loss and offset it against tax paid in either or both of the two previous income years. It applies to income years starting on or after 1 July 2026, and is first claimed as a refundable tax offset in 2026–27 company tax returns.
How does loss carry-back work?
Normally a company carries a tax loss forward and uses it against future profits. Loss carry-back reverses the direction. An eligible company can apply a revenue loss against tax it already paid in the two prior years, and receive a refundable tax offset now instead of waiting for future profits. For a company that paid tax in good years and then had a bad one, that turns a future deduction into current cash flow.
The ATO summarises the rules on its tax loss carry-back page.
Who can use it?
- Corporate tax entities only. Sole traders, partnerships and trusts can't carry back a loss. A corporate beneficiary of a trust can only carry back against its own prior tax.
- Turnover under $1 billion. This is aggregated annual global turnover.
- Revenue losses only. Capital losses can't be carried back.
What limits the refund?
Two limits apply, and both need checking before anyone promises a client a figure:
- Tax actually paid. The offset can't exceed the tax paid in the year(s) the loss is carried back to.
- The franking account balance. The carry-back is limited by the company's franking account balance. A company that has paid out its franking credits as franked dividends may have little or no room, even if it paid plenty of tax.
The franking account interaction can have further consequences. Check the treatment with your tax adviser and the ATO guidance before claiming.
What should firms do now?
- Identify company clients that paid tax in 2024–25 or 2025–26 and may make a loss in 2026–27.
- Check their franking account balances now. Dividend decisions this year affect how much can be carried back.
- Make sure the company has lodged its income tax returns for the previous five income years, which is a condition of claiming.
- Explain that the offset is claimed in the 2026–27 return, so the cash arrives after that return is lodged and processed, not during the year.
How Ezyiah helps
Ezyiah is an AI bookkeeper with its own double-entry ledger. It reconciles live bank feeds with AI and produces the P&L, Balance Sheet, Trial Balance and EOFY Statement from the same books, so the loss position and the supporting figures are ready for your accountant to review. Ezyiah doesn't prepare or lodge income tax returns. Your accountant handles the carry-back election and approves the return.
See Ezyiah for accounting firms.
Frequently asked questions
Is loss carry-back law in 2026?
Yes. It was enacted by the Treasury Laws Amendment (Tax Reform No. 2) Act 2026 (Royal Assent 26 August 2026) for income years starting on or after 1 July 2026.
Can trusts or sole traders carry back losses?
No. Only corporate tax entities can.
When can a company first claim it?
In its 2026–27 income tax return, as a refundable tax offset.
Can capital losses be carried back?
No. Only revenue losses can.
