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How does the scheme work

The scheme uses pair of years “taxable income year” and “net loss year”. You must also have had taxable income in the previous year – the taxable income year. Losses would only be carried back for one year. It means

  • losses from the 2019–20 year could be carried back to the 2018–19 year; and
  • losses from the 2020–21 year could be carried back to the 2019–20 year.

For example: A tourism operator in Rotorua filed a tax return for the year 2018-2019. A profit for that year was $100,000 tax paid on this was $28,000(28%). Now for 2019-20 year they incurred a loss of $100,000. This loss will be carried back to the filed tax return of 2018-19 by amending the return. The amendment will result into a tax refund of $28,000. When 2019-20 tax return is filed it must show a loss of $100,000.

Similarly, if the same tourism operator anticipating low visitors in the region and a loss in 2020-21 of $120,000. And a provisional tax of $30,000 is paid for the 2019-20 year. An amendment to re-estimate of provisional tax can be submitted to receive a refund $30,000.

Above example shows how taxpayers would be able to claim a refund for a loss carry-back by re-estimating provisional tax (where the 2019–20 is the taxable income year) or amending their tax return (where 2018–19 is the taxable income year).

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