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Businesses get increased access to losses

In the first quarter of this calendar year, legislation was passed that will supplement the ATO’s current “same business test” for losses with a more flexible “similar business test”. The new test will expand access to past year losses when companies enter into new transactions or business activities.

The similar business test allows a company (and certain trusts) to access losses following a change in ownership where its business, while not the same, is similar, having regard to:

– the extent to which the assets that are used in its current business to generate assessable income were also used in its former business to generate assessable income

– the extent to which the activities and operations from which its current business is generating assessable income were also the activities and operations from which its former business generated assessable income

– the identity of its current business and the identity of its former business

– the extent to which any changes to the former business resulted from the development or commercialisation of assets, products, processes, services, or marketing or organisational methods of the former business.

As a test for accessing past year losses, the similar business test will only be available for losses made in income years starting on or after 1 July 2015.

The ATO has announced that same business test and similar business test will be collectively known as the “business continuity test”.

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