Loss carry back
Discover how the 2026 Federal Budget loss carry back arrangements can improve cashflow for small businesses. Learn how eligible companies can claim refunds on prior year tax and reduce the impact of trading losses.
What this means for small business
For startup or small business to succeed, you need to take calculated risks.
The risks that may entail your business making a financial loss during periods of innovation or expansion.
This spectre of financial loss can be a barrier for risk-averse business owners. But the new loss carry back arrangements, introduced in the Federal Budget 2026, go some way towards reducing the negative impact of financial losses, by encouraging your business to innovate.
What is a loss carry back arrangement?
Loss carry back arrangements act as a vital fiscal safety net. They allow your business to apply current trading losses against taxed profits you earned in previous years, resulting in a direct cash refund from the government.
By using this mechanism, you effectively get an immediate injection of liquidity during difficult periods, such as unproven research and development or major scaling operations.
What’s the benefit for your business?
By reducing the long-term financial downside of an unsuccessful venture, the government’s new loss carry back policy encourages your business to pursue more ambitious innovation and capital expenditure – strategies you may have avoided previously due to the risk of losses.
As quoted on the Budget website, the aim of this new arrangement is to boost ‘economic resilience, support productivity and promote employment’ in Australian businesses.
How will the loss carry back arrangements work?
From 2026–27, eligible companies that make a loss in the current income year will be able to use that loss to get a refund against tax paid in the prior two income years. This carry back will apply to revenue losses only, and be limited by a company’s franking account balance.
It’s worth noting that loss carry back eligibility is limited to companies with aggregated annual global turnover of less than $1 billion, excluding some high-turnover organisations.
The Government is also introducing loss refundability to support new start‑up businesses. From 2028–29, small start‑up companies in their first 2 years of operation will be able to get a refund for tax losses, up to the value of fringe benefits tax and withholding tax paid on employee wages. This relief will be available to start-ups with aggregated annual turnover of less than $10 million.
Improved cashflow with the instant asset write-off
The Government is also improving cashflow for small businesses by permanently extending the current $20,000 instant asset write‑off from 1 July 2026.
If you are a small business with turnover up to $10 million, you will be able to immediately deduct eligible assets costing less than $20,000.
Speak With Our Team
If you would like to make use of loss carry back arrangements, or the instant asset write-off, please talk to our team.
We can help you with understanding the tax planning opportunities and reliefs available.
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