What's new?
Increasing access to company losses
On 1 March 2019, legislation was enacted that will supplement the 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 (or listed widely held trusts) enter into new transactions or business activities.
The similar business test will allow a company (or listed widely held trust) to access losses where their business, while not the same, is similar having regard to:
- the extent to which the assets that are used in its current business to generates 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, and
- 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 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.
For more information, see New legislation.
See also:
LCR 2017/D6 The business continuity test - carrying on a similar business
Who must complete a losses schedule?
If any of the following tests apply to your entity (company, trust or superannuation fund), you must complete and submit a losses schedule with your 2018 tax return.
A losses schedule is required if the entity: |
Company |
Trust |
Fund |
|---|---|---|---|
has total of tax losses and net capital losses greater than $100,000 carried forward to later income years |
Yes |
Yes |
Yes |
is required by section 165-13 or 165-96 of the Income Tax Assessment Act 1997 (ITAA 1997) to satisfy the business continuity test in Subdivision 165-E of that Act to deduct or apply a loss either in 2017–18 or in a later income year or, having passed the continuity of ownership test, has claimed a deduction for tax losses and/or applied net capital losses greater than $100,000 |
Yes |
|
|
is a listed widely-held trust that is required by section 266-125 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) to satisfy the business continuity test in Subdivision 269-F of that Schedule to deduct a tax loss in the 2017–18 or later income years or, having passed the 50% stake test, has claimed a deduction for tax losses greater than $100,000 |
|
Yes |
|
has a changeover time that occurred after 1.00pm by legal time in the Australian Capital Territory on 11 November 1999 and determined that it has an unrealised net loss as defined in the provisions of Subdivision 165-CC of the ITAA 1997 |
Yes |
|
|
is a life insurance company and has a total of complying superannuation class tax losses and net capital losses carried forward to later income years greater than $100,000 (complete part D of the schedule) |
Yes |
Yes |
|
has an interest in a controlled foreign company (CFC) that has 2016–17 losses greater than $100,000 |
Yes |
Yes |
Yes |
has an interest in a CFC that has deducted or carried forward a loss greater than $100,000 to later income years. |
Yes |
Yes |
Yes |
An entity may need to complete a losses schedule for certain aspects of its net capital losses. While some of the information requested in the losses schedule is also requested in the Capital gains tax (CGT) schedule 2018 (CGT schedule), an entity that completes a losses schedule may also need to complete a CGT schedule.
If the entity completes a losses schedule in respect of any aspect of its losses, all relevant parts of the schedule must be completed.
An entity that has joined a consolidated group as a subsidiary member during the income year must lodge a losses schedule covering any non-membership period if the entity satisfies any of the requirements for lodgment of that schedule, including where losses exceed $100,000 at the end of the non-membership period. The amounts at part A of the losses schedule must be transferred to U and V item 13 on the Company tax return 2018.