How to claim the tax offset

How to claim refundable tax offset for tax losses from 2019–20 to 2022–23 income years for eligible corporate entities.

Claiming the offset

If you want to claim the tax offset for an income year, you will need to make the loss carry back choice by the time you lodge your company tax return for that year. When making the choice, you will also need to specify the amount of tax loss you choose to carry back.

You will need to complete all the relevant labels correctly in your company tax return to claim the tax offset and avoid the common errors. For example, you need to include the amount of tax offset at both label S Loss carry back tax offset of item 13 and in label E Refundable tax offsets in the calculation statement. 

You cannot claim the tax offset in your Company tax return 2020 for a tax loss made in the 2019–20 income year. You can claim the tax offset in your company tax return for the 2020–21, 2021–22 or 2022–23 income years. Claiming the tax offset is optional. To the extent you choose not to carry back the losses, you may be able to carry them forward to a future income year.

Watch: Your guide to claiming the loss carry back tax offset

You can find more information on some of the topics mentioned in the video:

• Company tax return 2021
• Company tax return instructions 2021.

Information you need to claim the tax offset

You will need to complete additional labels in the Company tax return for the 2020–21, 2021–22 or 2022–23 income years if you want to make the choice to carry back losses. These labels provide us with information on your eligibility to claim the tax offset and the calculation of the amount. By completing these labels, we can process your claim in a timely manner.

To complete the additional labels, you will need to provide:

• your opening and closing franking account balance – to calculate the amount of the tax offset
• your aggregated turnover for each loss year – to ensure you meet the eligibility requirement and help inform future services and initiatives for business
• the amounts of your tax losses that you are carrying back – to inform us of your choice and to calculate the amount of the tax offset
• your tax liability for the income years you are carrying the loss back to – to calculate the amount of the tax offset
• the amounts of unutilised net exempt income for the income years you are carrying the losses back to – to calculate the amount of the tax offset.

You can start preparing for your claim by reviewing your franking account balance early and considering your aggregated turnover. This will give you the information you need to complete the additional labels.

Loss carry back tax offset tool

You can use the loss carry back tax offset tool to work out if you are eligible to claim the refundable tax offset. It also calculates the maximum amount you can choose to claim if you are eligible.

This tool helps you:

• work out if you are eligible to claim the tax offset
• calculate the maximum amount of tax offset you can claim if you are eligible
• by providing a printable report with    
  • all the information you provided
  • your eligibility
  • the maximum amount of tax offset claimable
  • the disclosures for each label in the company tax return that would be required to make your loss carry back claim. 
   

You can use the loss carry back tax offset tool when preparing your company tax return for the 2020–21, 2021–22 or 2022–23 income year.

Reviewing franking account balance

Watch: Review your franking account before making a loss carry back claim

You can find more information on some of the topics mentioned in the video:

• Franking account
• Aggregated turnover
• Company tax return instructions 2021
• Online services for business.

When reviewing your franking account balance, check your records and information to ensure you have:

• identified all transactions that result in a credit or debit in your franking account (see the table below for examples of records or information that you can use to check your transactions) – for example          
  • franking credits arise on paying income tax and pay as you go (PAYG) instalments, incurring a liability for franking deficit tax, and receiving franked distributions
  • franking debits arise on receiving refunds of tax including refunds of PAYG instalments, and paying franked distributions 
   
• recorded all transactions correctly in your franking account, including          
  • whether it is a debit or a credit
  • when the debit or credit arises 
   
• calculated the balance of the franking account correctly in determining whether the franking account is in a surplus (credit) or deficit (debit) position at the end of the income year.

When considering transactions that result in a credit or debit in your franking account, please note that:

• credits will arise in your franking account no earlier than when you pay income tax or PAYG instalments and therefore, if you pay an amount late, the credit to your franking account will also be delayed
• paying your Quarter 4 PAYG instalment on or before the last day of the income year will not result in a credit to your franking account on that day – the credit will occur in the subsequent income year
• a debit will arise in your franking account if you get an income tax refund because you claimed the tax offset – this will happen on the day you receive the refund.

Remember to keep your working papers for your records, particularly if you have identified and corrected errors when reviewing your franking account.

The following table provides examples of records or information that you can use to check your transactions which result in credits or debits in your franking account.

Examples of records or information

Transactions	Examples of records or information
Paying income tax or receiving income tax refund	Income tax account transaction history via Online services for agents or Online services for business
Paying PAYG instalments or receiving PAYG instalment refunds	Integrated client account transaction history via Online services for agents or Online services for business
Receiving franked distributions	Company minute book and distribution statements
Paying franked distributions	Company minute book and distribution statements
Receiving research and development (R&D) tax offset	Records of your R&D tax offset claims

For a full list of when a credit arises in the franking account, refer to section 205-15 of the Income Tax Assessment Act 1997.

For a full list of when a debit arises in the franking account, refer to section 205-30 of the Income Tax Assessment Act 1997.

Correcting errors in your franking account balance

If you have identified an error in your franking account balance, you need to both:

• correct that error in your franking account before you lodge your company tax return for the income year that you are making a claim
• provide the corrected opening balance in your company tax return if the error occurred prior to the commencement of the income year that you are making a claim.

Common errors

If you do not complete all relevant labels or you make an error when claiming your tax offset, this may:

• delay the processing of your claim
• result in an incorrect claim
• result in your choice being considered as not having been made.

Avoid common errors, including:

• completing the labels incorrectly, such as    
  • entering a tax loss amount at the incorrect label for the loss year or income year you are choosing to carry the loss back to
  • not including the net exempt income for the year you are choosing to carry a loss back to
  • not including the amount of tax offset at label S Loss carry back tax offset of item 13 and in label E Refundable tax offsets in the calculation statement 
   
• disclosing an incorrect opening or closing franking account balance because of errors made when preparing the franking account, such as          
  • missing entries
  • failing to reduce franking credits for any deferred debits (which could result from an amount of R&D tax offset refunded)
  • treating franked dividends received or paid incorrectly (for example, debiting instead of crediting)
  • including Quarter 4 PAYG instalments for an income year prior to year end 
   
• calculating the tax losses incorrectly – see business losses on what deductions can be included when calculating tax losses
• calculating the tax offset incorrectly, such as        
  • not using the tax rate for the income year in which you made the loss in step 1d of the calculation – for example, a base rate entity carrying back a tax loss made in the 2020-21 income year should use a tax rate of 26%
  • not using the tax payable amount at T5 in the company tax return for the income year you are carrying the loss back to as the amount of your income tax liability in step 2 of the calculation. 
   

To avoid common errors, visit Working out the tax offset.

How to claim refundable tax offset for tax losses from 2019–20 to 2022–23 income years for eligible corporate entities.