Tax Happy Hour: Explanation of Assessed Loss Balances: Limitations for Companies and Individuals – 20 August 2025

By attending this webinar you will gain the following competence

1. Loss Carryforward and Carryback Rules:
   • Companies can often carry losses forward to future profitable years or back to previous years to claim refunds.
   • Limitations may restrict the amount of loss that can be offset annually or overall, especially if there are significant changes in ownership or business activities.
2. Ownership Changes and “Change in Control” Restrictions:
   • Substantial ownership shifts can trigger restrictions on the utilization of carried-forward losses.
   • Typically, if more than a certain percentage of ownership changes hands, companies may lose the ability to offset losses against future income.
3. Time Limits on Loss Usage:
   • Many jurisdictions impose time limits (e.g., 7 or 10 years) within which losses can be utilized.
   • Unused losses after this period expire and cannot be carried forward or back.
4. Restrictions on Specific Types of Income:
   • Losses may only be offset against certain types of income, limiting their flexibility.
5. Group Loss Relief Rules:
   • Some jurisdictions allow companies within a group to share losses, but this is subject to specific rules and restrictions, including the nature of the group structure and timing.

For Individuals

1. Limited Loss Carryforward:
   • Personal income tax systems often allow individuals to carry forward capital losses or certain other losses, but the scope and duration are limited.
   • For example, capital losses may only be offset against future capital gains, with annual or lifetime limits.
2. Restrictions on Loss Offsets Against Ordinary Income:
   • Typically, personal losses (such as from business or capital) cannot offset employment income or other ordinary income types.
3. Time Limits:
   • Losses may only be carried forward for a specific number of years, after which they expire.
4. Restrictions Due to Changes in Personal Circumstances:
   • Changes such as marriage, divorce, or sale of assets can impact loss utilization.

Limitations and Considerations

• Tax Legislation Changes:
  Tax laws evolve, potentially tightening or relaxing loss utilization rules.
• Documentation and Compliance:
  Proper record-keeping is essential to substantiate loss claims and ensure compliance with applicable rules.
• Strategic Planning:
  Entities must plan effectively to maximize the benefit of assessed loss balances within the legal constraints.