Loss carry back returns on 1 July 2026: what construction company owners need to know

Construction runs in cycles. A strong couple of years can flip to a hard one quickly: a major client goes into administration, a big job stalls, or margin gets squeezed across the book at once. You pay solid tax in the good years, then hit a loss year and the cash pressure lands exactly when you can least afford it.

Until now, a loss in that year just sat there. You carried it forward and waited for future profit to use it up. The relief came eventually, but not when the business actually needed it.

That changes from 1 July 2026.

What loss carry back does

The Government is reintroducing loss carry back for companies, and this time it is a permanent feature of the system rather than a temporary measure.

In plain terms: if your company makes a tax loss, you can carry that loss back against tax you already paid in the previous two years and claim a refund. Instead of waiting on profits that may or may not arrive, you get some of your past tax back as cash in the year you are under pressure.

The first loss year you can use is 2026-27. A loss in that year can be carried back against tax paid in 2024-25 or 2025-26.

Who it actually helps

This is where the detail matters, because the headlines do not tell the whole story.

The measure applies to companies only. If you operate through a trust, a partnership, or as a sole trader, you are not eligible on structure alone. A lot of construction businesses sit in exactly that position, so the first question is not “did I make a loss” but “is my operating entity a company”.

On size, it applies to companies with aggregated annual global turnover under $1 billion, so effectively every construction company in our client base qualifies on turnover.

It covers revenue losses only. Capital losses stay where they are, carried forward against future capital gains.

The catch most summaries skip

The refund is capped at your company’s franking account balance.

In practice, if you have been paying yourself franked dividends out of those profitable years, your franking account may already be run down, and the refund can be a good deal smaller than the loss suggests. The refund also creates a franking debit when it lands. It is worth knowing where your franking account sits before you count on the cash, and it is the kind of thing that is easy to get wrong without advice.

What to do now

You cannot claim anything yet, and the measure still has to pass through legislation, with final law expected later in 2026. But there is groundwork worth doing before the 2026-27 year closes:

Check whether your operating entity is actually a company, and whether your structure still fits the way the business runs.

Know your tax position early, not at year end. If a loss year is coming, the planning happens during the year, not after it.

Keep your records and lodgements current, so a refund claim is clean when the time comes.

Understand your franking account balance, because that is what sets the ceiling on any refund.

Where Xact fits

Knowing whether loss carry back will help your business is not a guessing game, and it is not the same answer for every builder or trade. It depends on your structure, your franking position, and the tax you have actually paid in recent years. That is the work we do every day for construction companies.

If your business has had a strong run and you are bracing for a tougher year, it is worth a conversation now rather than after the books close.

Book a consultation with our team and we will tell you, plainly, whether this measure puts cash back in your business and what to have in place before it does.