Can a tax loss for an income year be carried forward and deducted from assessable income in future income years? Previously, this is possible if the company passes either the continuity of ownership test (COT) or the same business test.
On 7 December 2015, the Government announced a number of measures aimed to incentivise and reward innovation. One of these measures was to supplement the ‘same business test’ with a more flexible ‘similar business test’ for the purposes of working out whether a company’s tax losses and net capital losses from previous income years can be used.
With the passing of Treasury Laws Amendment Bill (2017 Enterprise Incentives No. 1) early this year, the existing ‘same business test’ has been retained but a new test has been introduced —- 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.
The similar business test also applies in working out whether a debt written off as bad can be deducted in an income year, and whether tax losses of listed widely held trusts can be used.
Know more about the similar business test and learn from several examples of its operation. Subscribe to Effective PD’s webinar by visiting www.effectivepd.com.au. 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.
