Increasing access to company losses
On 7 December 2015 the government announced, as part of its National Innovation and Science agenda, that the current ‘same business test’ for company losses will be relaxed to allow businesses to access past year losses when they have entered into new transactions or business activities.
To give effect to this, a new ‘similar business test’ will be introduced. Under this test, companies will be able to access losses where their business, while not the same, is similar having regard to:
- the extent to which the company generates assessable income from the same assets and sources, and
- whether any changes to the business are changes that would reasonably be expected to have been made to a similarly placed business.
This measure is expected to take effect from 1 July 2015. At the time of publishing, these changes had not become law.
Who must complete the Consolidated groups losses schedule 2016?
A head company of a consolidated group or multiple entry consolidated (MEC) group must complete the schedule and lodge it with the Company tax return 2016 (NAT 0656), if any of the following apply:
- The total of the group's tax losses and net capital losses carried forward to later income years is greater than $100,000.
- The total of its tax losses and net capital losses transferred from joining entities is greater than $100,000.
- The total of its tax losses deducted and net capital losses applied is greater than $100,000.
- It has an interest in a controlled foreign company (CFC) that has current year losses greater than $100,000.
- It has an interest in a CFC that has deducted or carried forward a loss to later income years greater than $100,000.
- It is a life insurance company, or is treated as a life insurance company under Subdivision 713-L of the ITAA 1997, 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).
The examples provided in these instructions are for illustration purposes only and may use lower figures, for simplicity.
A head company may need to complete the schedule for certain aspects of its net capital losses. While some of the information requested in the schedule is also requested in the Capital gains tax (CGT) schedule 2016 (NAT 3423) (CGT schedule), a head company that completes a consolidated groups losses schedule may also need to complete a CGT schedule.
If the head company completes the schedule for any aspect of its losses, it must complete all relevant parts of the schedule. For example, if a head company completes the schedule as a result of having tax losses and net capital losses carried forward to later income years greater than $100,000, it must also provide details of controlled foreign company (CFC) losses, even if the total of these losses is less than $100,000.
These instructions are based on provisions relating to consolidated groups. Some of those provisions are modified in Division 719 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to MEC groups.
Last modified: 26 May 2016QC 48082