ATO Interpretative Decision
ATO ID 2004/553 (Withdrawn)
Income Tax
Company tax losses: same business test - latest time practicable to show continuity of ownership test satisfiedFOI status: may be released
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This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 5 March 2010
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Where a loss company is able to demonstrate some period when it satisfied the continuity of ownership test (COT), but is unable to identify the precise time when it failed to meet the test, does the loss company have a test time for the purpose of applying the same business test (SBT) in order to deduct a tax loss?
Decision
Yes. The loss company's test time for the purpose of applying the SBT is the latest time it is practicable to show it satisfied the COT pursuant to Item 1 of subsection 165-13(2) of the Income Tax Assessment Act 1997 ( ITAA 1997).
Facts
Loss company incurred tax losses for the 2000-01 and 2001-02 income years.
For the 2002-03 income year, Loss company's total assessable income exceeds its total deductions (except tax losses). Loss company wishes to deduct an amount of tax loss incurred for the 2000-01 income year.
Loss company is able to demonstrate that the COT was satisfied for the period 1 July 2000 to 30 April 2002. Immediately after 30 April 2002, there was a change in ownership of a significant shareholding in Loss company and, in the circumstances, it is not practicable for Loss company to trace ultimate beneficial ownership of another significant shareholding in Loss company held by a listed non-resident company, to demonstrate that it continued to satisfy the COT from that date.
Division 166 of the ITAA 1997 does not apply to Loss company.
Reasons for Decision
Section 165-12 of the ITAA 1997 requires the conditions of the COT to be satisfied at all times during the ownership test period from the start of the loss year (being 1 July 2000 in this instance) to the end of the income year (being 30 June 2003). If this test cannot be satisfied, a company must satisfy the SBT to be able to deduct a tax loss.
Item 1 of subsection 165-13(2) of the ITAA 1997 provides that where the COT conditions are satisfied for some period of the ownership test period starting at the start of the ownership test period (being 1 July 2000), the test time for the purposes of the SBT is the latest time that it is practicable to show is in the period. In this instance, the test time is 30 April 2002.
Date of decision: 29 June 2004Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
section 165-12
subsection 165-13(2)
Keywords
Continuity of ownership test
Prior year losses
Same business test
Tax loss
ISSN: 1445-2782
| Date: | Version: | |
| 29 June 2004 | Original statement | |
| You are here → | 5 March 2010 | Archived |