Loss Carryback Australia 2025: Tax Refunds & Cash Flow Boosts

For many Australian businesses, the past few years have been a rollercoaster of economic uncertainty. Amidst fluctuating demand, rising costs, and persistent supply chain challenges, managing tax obligations and cash flow is more crucial than ever. Enter the loss carryback tax measure—a policy designed to put cash back into the hands of struggling businesses when they need it most. As we head into 2025, understanding and leveraging loss carryback could be the difference between simply surviving and truly thriving.

What Is Loss Carryback and Why Does It Matter in 2025?

Loss carryback is a tax provision that allows eligible companies to apply current-year tax losses against profits from previous years, resulting in a potential refund of taxes already paid. This is a reversal of the usual ‘carry forward’ rule, where losses can only be used to offset future profits. The loss carryback policy was reintroduced in Australia as a response to the pandemic’s economic fallout and has been extended and tweaked through successive federal budgets, with significant relevance for 2025.

In practice, this means that if your business made profits and paid tax in earlier years but suffered a loss in a later year, you may be able to claim back some of that tax as a refund, providing an immediate cash injection.

• Applies to: Corporate tax entities (typically companies, not sole traders or trusts)

• Eligible periods for carryback: For the 2024–25 income year, losses can be carried back to offset profits from as far back as the 2018–19 income year (subject to policy updates in the May 2024 Federal Budget)

• Cap: The refund is limited to the amount of earlier tax paid and cannot create a franking account deficit

2025 Policy Updates and Eligibility: What’s Changed?

The 2024–25 Federal Budget confirmed that the loss carryback measure will continue for eligible companies, reflecting ongoing economic recovery efforts. Key eligibility criteria remain:

• Aggregated turnover of less than $5 billion: Most small and medium enterprises (SMEs) are covered

• Eligible years: Losses from the 2019–20 to 2024–25 income years can be carried back to offset profits from 2018–19 onwards

• Must have lodged tax returns for the relevant years

• Cannot exceed franking account balance: The tax refund is capped at the company’s franking account surplus, ensuring the system remains fair

Recent updates from the ATO emphasise streamlined electronic claiming via the company tax return. The process has been simplified, with new online guidance and pre-filled forms to help companies avoid errors and delays.

Real-World Impact: How Australian Businesses Are Using Loss Carryback

Consider the case of a regional manufacturing company, “Aussie Widgets Pty Ltd,” which posted strong profits and paid tax in 2019 and 2020. In 2023 and 2024, rising input costs and supply chain hiccups led to significant losses. By using the loss carryback measure, Aussie Widgets was able to claim a substantial refund on taxes paid in 2019 and 2020, injecting over $100,000 back into their cash flow. This refund helped the business fund new equipment and retain key staff during the downturn.

Other companies are using their refunds to:

• Repay business loans or reduce debt

• Invest in digital upgrades or green technology

• Build up a cash buffer for future uncertainty

Financial advisers are recommending that companies model different scenarios—comparing the benefits of carrying losses back for an immediate refund versus carrying them forward for future tax savings. The right choice depends on each business’s outlook and strategy.

How to Claim Loss Carryback in 2025: Steps for Success

To access the loss carryback refund, companies need to:

• Calculate tax losses for the current year (2024–25)

• Check prior years’ taxable income and tax paid (from 2018–19 onwards)

• Review franking account balance to ensure sufficient credits

• Use the ATO’s online company tax return form to claim the refundable tax offset

• Keep supporting records and calculations in case of audit

The ATO’s online portal now includes real-time checks to help flag common errors, making the process more user-friendly for finance teams and accountants.

Conclusion: Why Now Is the Time to Act

Loss carryback offers a rare chance for Australian businesses to recover past tax outlays and strengthen their financial position during volatile times. With policy certainty through the 2024–25 year and simplified claiming processes, there’s never been a better time to review your company’s eligibility and cash flow strategy.