Do not complete at Part B
This section only relates to companies and listed widely held trusts.
Do not complete Part B – items 1 or 2 if, in the 2022–23 income year:
- no loss has been claimed as a deduction,
- no loss applied against a net capital gain, or
- losses have not been transferred in or out (in the case of companies).
The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.
For more information, see LCR 2019/1 The business continuity test – carrying on a similar business.
1 Whether continuity of majority ownership test passed
If the entity has deducted or applied (or, if applicable, transferred in or transferred out) a loss, which was incurred in any of the listed years, print X in either the Yes or No box to indicate whether the entity has satisfied the continuity of majority ownership test in respect of that loss.
The aim of item 1 is to find out if:
- the continuity of majority ownership test at section 165-12 of the ITAA 1997 if the entity is a company, or
- the 50% stake test at Subdivision 269-C of Schedule 2F to the ITAA 1936 if the entity is a listed widely held trust
has been satisfied in respect of a loss if a loss in any of the periods listed at item 1 is deducted or applied if the entity is a company or listed widely held trust.
For more information regarding the operation of the loss rules, see Losses.
Year of loss
Print X in the Yes boxes at item 1, labels A to F (as applicable) if, during 2022–23, the entity seeks to deduct or apply a loss of the relevant year and the entity has passed:
- the continuity of majority ownership test, if the entity is a company, or
- the 50% stake test, if the entity is a listed widely held trust in respect of the loss of that particular year.
Print X in the No boxes at item 1, labels A to F (as applicable) for each year in respect of which the entity seeks to deduct or apply a loss, if the continuity of majority ownership test or the 50% stake test, as applicable, has not been satisfied in respect of that loss and the entity is required to satisfy the business continuity test.
If there was no loss deducted or applied (or, if applicable, not transferred in or transferred out) in respect of a particular year, leave the boxes next to that year blank.
Examples for part B item 1
Although examples 3 and 4 are for companies, the examples, notes and comments apply equally to listed widely held trusts (which must satisfy the 50% stake test).
Example 3: Continuity of majority ownership test
A company had incurred tax losses in earlier income years. The company deducted all of these tax losses in respect of 2022–23.
At the beginning of 2022–23, the company had undeducted losses from 2017–18, 2019–20, 2020–21 and 2021–22. The continuity of majority ownership test was failed during 2019–20 but all other tests for allowing the tax losses to be deducted have been passed by the company.
On these facts, for the tax losses of 2019–20 and earlier income years, the company has not passed the continuity of majority ownership test.
|
Year of loss |
Label |
Yes |
No |
|---|---|---|---|
|
2022–23 |
A |
- |
- |
|
2021–22 |
B |
X |
- |
|
2020–21 |
C |
X |
- |
|
2019–20 |
D |
- |
X |
|
2018–19 |
E |
- |
- |
|
2017–18 and earlier income years |
F |
- |
X |
The above example shows that:
- the company failed the continuity of majority ownership test for the tax losses of 2017–18 (and earlier income years) and 2019–20.
- there was no deduction for a tax loss in 2018–19
- the company passed the continuity of majority ownership test for the tax losses of 2020–21 and 2021–22.
Example 4: Continuity of majority ownership test
A company that incurred a tax loss in 2017–18 subsequently undergoes a change in majority ownership in 2018–19. The company satisfies the business continuity test in respect of the 2017–18 tax loss.
The company incurs a further tax loss in 2019–20 and satisfies the continuity of majority ownership test in respect of this 2019–20 tax loss.
In 2022–23, the company deducts the tax losses incurred in 2017–18 and 2019–20.
Print X in the Yes box at label D for 2019–20 and X in the No box at label F for 2017–18 and earlier income years.
End of example2 Amount of losses deducted or applied
Amount of losses deducted/applied for which the continuity of majority ownership test is not passed but the business continuity test is satisfied – excludes film losses
The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.
For more information, see LCR 2019/1 The business continuity test – carrying on a similar business.
Write at item 2 the total amount of losses deducted or applied during 2022–23 (if the entity is either a company or a listed widely held trust) for which the business continuity test must be satisfied.
In addition to those companies with either tax losses or net capital losses that have not passed the continuity of majority ownership test, this item also applies to listed widely held trusts with tax losses that have not passed the 50% stake test.
For more information regarding the operation of the loss rules, see Losses.
G Tax losses
Write at item 2, label G the amount of tax losses deducted by the entity that do not meet the continuity of majority ownership test but satisfy the business continuity test.
H Net capital losses
Write at item 2, label H the amount of net capital losses applied by a company that do not meet the continuity of majority ownership test but satisfy the business continuity test.
Example 5: Amount of losses subject to satisfying business continuity test
|
Year |
Tax loss |
Net capital loss |
|---|---|---|
|
2016–17 |
$1,000 |
$0 |
|
2017–18 |
$2,000 |
$0 |
|
2018–19 |
$0 |
$500 |
|
2019–20 |
$1,600 |
$800 |
|
2020–21 |
$0 |
$0 |
|
2021–22 |
$10,000 |
$2,000 |
|
2022–23 |
$0 |
$0 |
|
Total |
$14,600 |
$3,300 |
There was a change in the underlying beneficial ownership of the company in 2020–21.
The company passed the business continuity test and all other tests in relation to the losses incurred prior to that year and passed the continuity of majority ownership test and all other tests in relation to the 2021–22 losses.
Tax losses
All tax losses incurred in 2016–17, 2017–18 and 2019–20 were deducted in 2022–23, as well as $6,000 of the 2021–22 tax loss.
Net capital losses
All of the 2018–19 net capital loss and $600 of the 2019–20 net capital loss were applied in 2022–23.
Of all of the above losses, which are being applied in 2022–23, those which are subject to the business continuity test being satisfied by the company are as follows:
Tax losses
- 2016–17 ($1,000)
- 2017–18 ($2,000)
- 2019–20 ($1,600)
Net capital losses
- 2018–19 ($500)
- 2019–20 ($600)
|
Type of loss |
Label |
Amount |
|---|---|---|
|
Tax losses |
G |
$4,600 |
|
Net capital losses |
H |
$1,100 |
The 2021–22 tax loss of $6,000 was deducted by the company on the basis that the company had satisfied the continuity of majority ownership test. Therefore, this amount is not shown at label G Tax losses.
As $200 of the 2019–20 net capital loss was not applied during 2022–23, that amount of $200 is not shown at label H Net capital losses for 2022–23 even though the business continuity test would need to be passed in a later income year in order for the company to be able to apply that net capital loss in a later income year.
End of example3 Losses carried forward
Losses carried forward for which the business continuity test must be satisfied before they can be deducted/applied in later years – excludes film losses.
The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.
For more information, see LCR 2019/1 The business continuity test – carrying on a similar business.
Item 3 asks for information about the tax losses and net capital losses for which the entity must satisfy the business continuity test in subsequent years for the entity to be able to deduct or apply those losses.
I Tax losses
Write at item 3, label I the total amount of tax losses carried forward to later income years for which the business continuity test must be satisfied for the entity to deduct those tax losses in later income years.
J Net capital losses
Write at item 3, label J the total amount of net capital losses carried forward to later income years for which the business continuity test must be satisfied for the company to apply those net capital losses in later income years.
Example 6: Losses carried forward for which business continuity test must be satisfied
|
Year |
Tax loss |
Net capital loss |
|---|---|---|
|
2016–17 |
$1,500 |
$0 |
|
2017–18 |
$3,000 |
$0 |
|
2018–19 |
$0 |
$700 |
|
2019–20 |
$1,900 |
$900 |
|
2020–21 |
$0 |
$0 |
|
2021–22 |
$1,000 |
$1,500 |
|
2022–23 |
$0 |
$0 |
|
Total |
$7,400 |
$3,100 |
A change in the underlying beneficial interests in the company took place during 2020–21. As a result, the company must satisfy the business continuity test for the tax losses and net capital losses.
As the similar business test came into effect from 1 July 2015, the company may apply either the same business test or similar business test to determine whether the company can carry forward losses incurred in the 2016-17 and following income years.
The 2021–22 tax loss ($1,000) and the net capital loss ($1,500) are not affected by the change in the underlying beneficial interest of the company.
|
Type of loss |
Label |
Amount |
|---|---|---|
|
Tax losses |
I |
$6,400 |
|
Net capital losses |
J |
$1,600 |
End of example
4 Do current year loss provisions apply?
Print X in the Yes box at item 4, label K if the company is required to calculate its taxable income or tax loss under the provisions of Subdivision 165-B or its net capital gain or net capital loss under the provisions of Subdivision 165-CB.
Print X in the No box at item 4, label K if the company is not required to calculate its taxable income or tax loss under the provisions of Subdivision 165-B or its net capital gain or net capital loss under the provisions of Subdivision 165-CB.
A company is required to calculate its taxable income and tax loss under Subdivision 165-B of the ITAA 1997 where it does not satisfy the continuity of majority ownership test for the whole income year; see section 165-35 of the ITAA 1997.
The current year loss provisions also apply where, during the income year, a person begins to control, or becomes able to control, the voting power in the company for the purpose or one of the purposes of gaining an advantage under the ITAA 1997 or gaining such a benefit for someone else; see section 165-40 of the ITAA 1997.
However, the current year loss rules do not apply in either case if the business continuity test is satisfied.
For more information on the application of these rules, see Current year CFC losses.
Continue to: Part C – Unrealised losses – company only