A tax measure that could put cash back into struggling companies cleared Parliament this week. The Senate passed the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 on Wednesday 19 August. The bill also makes the $20,000 instant asset write-off permanent, which we have covered before, but the part that deserves fresh attention is the return of loss carry back. At the time of writing the bill is waiting on Royal Assent, the final formal step before it becomes law.

What loss carry back does

Normally, if your company makes a tax loss, you carry it forward and use it against profits in a future year. That is no help with cash flow in the bad year itself. Loss carry back works in the other direction. An eligible company can choose to apply a tax loss against tax it paid in either or both of the previous two income years, and receive the benefit as a refundable tax offset.

Treasurer Jim Chalmers has said the measure is expected to help around 85,000 businesses, most of them small, and that it will "provide timely cash flow support to bolster resilience".

The key details so far

  • It applies to corporate tax entities, which in practice mostly means companies, with aggregated annual global turnover under $1 billion.
  • It covers revenue tax losses from income years starting on or after 1 July 2026.
  • For a company with a standard 30 June year end, the first year a loss can be carried back is the year ending 30 June 2027.
  • The loss is applied against tax paid in one or both of the two previous income years.

If you trade as a sole trader, partnership or family trust, do not assume the measure applies to you. It is built around company tax.

What to do now

  • Get your lodgments up to date. A carry back claim relies on tax actually paid in earlier years, so overdue company returns will get in the way.
  • Know your numbers early. If this financial year is shaping up as a loss, accurate monthly bookkeeping will let you estimate the potential offset well before year end.
  • Do not spend the refund yet. The offset is expected to be claimed through the company tax return, so for most companies the cash will not arrive until after the return for the year ending 30 June 2027 is lodged.
  • Think about structure with care. A tax offset alone is rarely a good reason to change how you operate, but it is one more factor to weigh up.

We expect the ATO to publish detailed guidance once the bill receives Royal Assent. This article is general information only. Talk to your accountant about how the rules apply to your company.