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  • Loss recoupment rules for companies

    2015 changes

    On 16 September 2015, changes to the loss recoupment rules for companies received royal assent.

    Broadly, these changes were made in order:

    • to allow companies with shares carrying unequal rights to dividends or capital distributions, or having unequal voting power, to be able to apply the Continuity of Ownership Test ('COT') – these changes apply from 1 July 2002
    • to ensure that in applying the COT ownership does not have to be traced through a complying super fund, a super fund that is established in a foreign country and is regulated under a foreign law, a complying approved deposit fund, a special company, a managed investment scheme or a first home savers account trust in a company's ownership structure – these changes apply from the 2011–12 income year
    • to clarify that in the consolidation regime the entry history rule is disregarded in applying the business continuity test – these changes apply from 1 July 2002 for the same business test, and from 1 July 2015 for the similar business test.

    2020 changes

    Further amendments received royal assent on 22 June 2020 which make changes to the operation of the COT where a new company is interposed between the test company and its shareholders who have interests of less than 10%, and shareholders acquire identical interests in the new interposed company, in exchange for their shares in the test company. In this situation, the test company will not automatically fail the COT simply because of the interposition.

    The changes ensure that the COT operates appropriately where a company is interposed between a test company and its shareholders who have interests of less than 10%.

    Legislation and supporting material

    The 2015 changes received royal assent on 16 September 2015.

    The 2020 changes received royal assent on 22 June 2020

    For more information, refer to:

      Last modified: 25 Jun 2020QC 31719