Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS

Division 165 - Income tax consequences of changing ownership or control of a company

Subdivision 165-A - Deducting tax losses of earlier income years

Operative provisions

SECTION 165-13 Alternatively, the company must satisfy the business continuity test

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165-13(1)

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This section sets out the condition that a company must meet to be able to deduct the *tax loss if:

(a) the company fails to meet a condition in subsection 165-12(2) , (3) or (4); or

(b) it is not practicable to show that the company meets the conditions in those subsections.

Note:

Other provisions may treat the company as meeting, or failing to meet, the conditions in subsections 165-12(2), (3) and (4) .

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History

S 165-13(1) amended by No 164 of 2007 , s 3 and Sch 6 items 6 to 8, by omitting " (other than a company covered by section 165-212A) " after " condition that a company " and repealing note 2, applicable to:

(a) any tax loss that is incurred in an income year commencing on or after 1 July 2005; and

(b) any net capital loss that is made in an income year commencing on or after 1 July 2005; and

Note 2 formerly read:

Note 2:

Companies whose total income for the income year is more than $100 million cannot meet the condition in this section for that year: see section 165-212A .

S 165-13(1) amended by No 147 of 2005, s 3 and Sch 1 items 20 and 21, by substituting " Note 1 " for " Note " in the note and inserting Note 2, effective 14 December 2005.

S 165-13(1) amended by No 147 of 2005, s 3 and Sch 1 item 19, by substituting " a company (other than a company covered by section 165-212A) " for " the company " (first occurring), effective 14 December 2005. No 147 of 2005, s 3 and Sch 1 item 172 contains the following application provision:

172 Application of items relating to the same business test
(1)
The amendment applies in respect of:

(a) any tax loss that is incurred in an income year commencing on or after 1 July 2005; and

(b) any net capital loss that is made in an income year commencing on or after 1 July 2005; and

(c) any deduction in respect of a bad debt that is incurred in an income year commencing on or after 1 July 2005.

(2) Exceptions.
However, the amendment does not apply to:

(a) a loss that is incurred by a head company in an income year commencing on or after 1 July 2005 because of the operation of section 707-140 of the Income Tax Assessment Act 1997 if the loss was actually incurred by the joining entity or another entity in an income year commencing before that date; or

(b) any tax loss or net capital loss, incurred or made in an income year commencing on or after 1 July 2005, but only to the extent that it would be taken to be a tax loss or net capital loss of the company for an earlier income year under subsection 165-115B(1) or (2) of the Income Tax Assessment Act 1997 if:

(i) the day before the start of that year were a changeover time for the purposes of Subdivision 165-CC of that Act; and

(ii) no changeover time actually occurred after that time.

Note: Section 707-140 of the Income Tax Assessment Act 1997 is about the effect of transferring a loss from a joining entity to a head company of a consolidated group.

165-13(2)

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The company must satisfy the *business continuity test for the income year (the business continuity test period ). Apply the test to the *business the company carried on immediately before the time (the test time ) shown in the relevant item of the table.

Table

**Table**
Test time
Item	If:	The test time is:
1	It is practicable to show there is a period that meets these conditions: (a) the period starts at the start of the ownership test period or, if the company came into being during the loss year, at the time the company came into being; (b) the company would meet the conditions in subsections 165-12(2), (3) and (4) if the period were the ownership test period for the purposes of this Act	The latest time that it is practicable to show is in the period
2	Item 1 does not apply and the company was in being throughout the *loss year	The start of the loss year
3	Item 1 does not apply and the company came into being during the *loss year	The end of the loss year

For the business continuity test: see Subdivision 165-E .

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