Increasing access to company losses: ‘Similar business test’

Most businesses will be familiar with the ‘same business test”. However, from 1 March 2019, there is also a more flexible test called the ‘similar business test’.

The purpose of these tests is to determine whether a company’s tax losses and net capital losses from previous income years can be used.
The new test should make it easier to access past year losses when companies enter into new transactions or business activities.

Under the similar business test, a company (and some trusts) can access losses following a change in ownership where its business is similar having regard to various factors, including the:

  • assets used by the business to generate assessable income;
  • activities and operations used to generate assessable income;
  • identity of the business; and
  • changes resulting from the development or commercialisation of assets, products, processes, services, or marketing or organisational methods.

For more information, and to view the Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Act 2019, visit this ATO link – https://www.ato.gov.au/

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