Loss Carry Back – What It Means for Your Business

Supporting Business Growth

Growing a successful business often involves taking calculated risks.

Whether investing in new equipment, expanding operations or developing new products, periods of lower profitability or even trading losses can sometimes be part of the journey.

The proposed loss carry back measures announced in the 2026–27 Federal Budget are designed to help reduce the financial impact of those losses while improving business cash flow.

What Is Loss Carry Back?

Loss carry back allows eligible companies to apply current-year revenue losses against taxable profits earned in previous income years.

Rather than waiting to use those losses in future years, eligible businesses may receive a refund of tax previously paid, providing valuable liquidity when it is needed most.

Why It Matters

Improved cash flow gives businesses greater confidence to invest.

The proposed measures aim to encourage innovation, expansion and capital investment by reducing the financial consequences of unsuccessful business initiatives.

For many businesses, this additional liquidity could support hiring staff, purchasing equipment or funding future growth opportunities.

How the Proposed Rules Work

From the 2026–27 income year, eligible companies may be able to carry revenue losses back against tax paid in the previous two income years.

The proposed refund will generally be limited by:

• The company's franking account balance

• Aggregated annual global turnover of less than $1 billion

• Revenue losses only (not capital losses)

  
  

Additional Support for Start-ups

The Budget also proposes additional support for eligible start-up companies.

From 2028–29, qualifying start-ups with aggregated annual turnover below $10 million may be able to receive refunds for certain tax losses incurred during their first two years of operation, helping improve early-stage cash flow.

Permanent Instant Asset Write-Off

The Federal Budget also proposes permanently extending the $20,000 instant asset write-off from 1 July 2026.

Eligible small businesses with annual turnover below $10 million will continue to be able to immediately deduct qualifying business assets costing less than $20,000, improving cash flow and encouraging investment.

Planning for the Future

While these measures remain subject to legislation, they represent significant proposed changes for eligible businesses.

Understanding how the proposed loss carry back rules and instant asset write-off may apply to your circumstances can help improve cash flow and support long-term business growth.

At Lockwood & Ward, we help business owners understand new tax measures, identify planning opportunities and develop practical strategies that support sustainable growth.

Contact Lockwood & Ward on (02) 9299 7044, visit www.lockwood.com.au, or stop by Level 9, 50 Clarence Street, Sydney NSW 2000.