Australia: Common loss carryback errors identified

Common mistakes made by businesses claiming the loss carryback

Common mistakes made by businesses claiming the loss carryback

The Australian Taxation Office (ATO) published a list of common mistakes made by businesses claiming the loss carryback in recent claims.

According the ATO, taxpayers need to:

  • Correctly calculate the tax offset: To calculate the tax offset, taxpayers need to use the tax rate in the income year in which they made the loss.
  • Use the correct income tax liability amount: The amount of the taxpayer’s tax offset cannot exceed the income tax liability for the income year the loss is carried back. This is the amount at label T5 Tax payable in the calculation statement of the company’s tax return for that year.
  • Correctly compute franking account balance: The amount of the tax offset cannot exceed the franking account closing balance at the end of the claim year. The ATO recommends that a review of the franking account is undertaken prior to lodging the company tax return.
  • Complete all mandatory labels: If the taxpayer is claiming loss carryback (LCB), the taxpayer must complete all of the required LCB labels in item 13 as well as the opening and closing franking account balance labels in item eight of the company tax return. Use the ATO’s company tax return instructions to help work out which labels must be completed.


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