Tax Losses

Taxable income is the assessable income received by a company over the financial year, less deductions incurred. Assessable income excludes income such as Cash Flow Boost and some government grants. Deductions are total expenditures less exclusions such as costs incurred for entertainment. These exclusions are resolved by your tax agent when preparing your tax return (known as tax reconciliation).

If the deductions exceed the assessable income, then the taxable position is negative. This negative can be carried forward for future years to offset against future positive taxable positions. Since the 2020 budget it can also be carried-back to recoup earlier profits (going back as far as the 2018-19 tax year).

Aa carry-forward tax loss can be accumulated across multiple years. This accumulation is included in your tax return.

If your R&DTI claim is refundable (because your aggregated turnover is less than $20m) then you can cash out tax losses to receive a cash refund. In general, the maximum refund received in cash is the lower of the tax losses available (after processing any carry-back refund), or the R&DTI offset. If the R&DTI eligible expenditure has been capitalised, then the cash received can exceed tax losses available and there are some additional disclosures to get correct on the R&D schedule and the company tax return. We will work with your tax agent to get those right if these disclosures are unfamiliar for them.