The ‘business continuity test’ introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Act 2019 retains the existing ‘same business test’ and introduces the ‘similar business test’. Under the similar business test, companies and listed widely held trusts will be able to utilise tax losses made from carrying on a business against income derived from carrying on a similar business following a change in ownership or control.
Companies can carry forward a tax loss indefinitely, and use it when they choose, provided they have either:
• maintained the same ownership and control
• carried on the same business or similar business test (applies on or after 1 July 2015) since the tax loss was incurred.
A company fails the continuity of ownership test if it undergoes a substantial change in its ownership or control during the period starting at the beginning of the loss year and ending at the end of the year when the company wants to use the loss.
In the continuity of ownership test, shares carrying more than 50% of all voting, dividend and capital rights should be beneficially owned by the same persons at all times during the ownership test period. When we say “ownership test period”, we refer to the period from the start of the loss year to the end of the income year in which the loss is to be deducted.
Find out more about claiming company tax losses from Effective PD’s webinar. Subscribe to Effective PD’s webinar. Effective PD offers an innovative way for busy accountants to be on top of their game with continuing professional development in a brief, flexible and easy way. Visit www.effectivepd.com.au.
